PT Matahari Department Store Tbk (Incorporated with Limited Liability Under the Laws of the Republic of Indonesia)

PT Matahari Department Store Tbk (Incorporated with limited liability under the laws of the Republic of Indonesia)

Offering of 1,342,245,500 Offer Shares at an Offer Price of Rp10,850 per Share

This Offering Circular has been prepared by the Company and the Selling Shareholders in connection with the offer by the Selling Shareholders of 1,167,170,000 of the Company’s Shares, and up to 175,075,500 additional Over-allotment Shares (together, the “Offer Shares”), for Rp10,850 per Share (the “Offer Price”). The Offer Shares are being offered by the Selling Shareholders: (i) to eligible investors resident outside of Indonesia and Malaysia as described in this Offering Circular; (ii) to certain institutional investors in Indonesia through a private placement; and (iii) to certain persons in Malaysia through a private placement (collectively referred to as the “Offering”).

The Offer Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “US Securities Act”) or any state securities law in the United States and may not be offered, sold, pledged or transferred within the United States, except that Offer Shares may be offered, sold or delivered to qualified institutional buyers in reliance on an exemption from registration under the US Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another applicable exemption from or in a transaction not subject to, the registration requirements of the US Securities Act. The Offer Shares may be offered, sold or delivered outside the United States in offshore transactions in accordance with Regulation S. Prospective investors are hereby notified that sellers of the Offer Shares may be relying on the exemption from the provisions of Section 5 of the US Securities Act provided by Rule 144A or another exemption under the US Securities Act.

Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this Offering Circular, including the risk factors set out in Section 4 – “Risk Factors”. The Offer Shares are listed on the Indonesian Stock Exchange (the “IDX”), under the symbol “LPPF”. The Offer Price has been determined following a book building exercise, has not been determined by reference to the market price of the Offer Shares and may not reflect the market price of the Offer Shares after completion of the Offering. The closing price per Share on the IDX on 21 March 2013 was Rp4,200.

The Offering does not constitute and shall not be deemed a public offering by a Shareholder, the Company or the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers pursuant to Indonesian capital market laws and regulations. No offer of Offer Shares is being made to Indonesian persons under this Offering Circular, except through a private placement in Indonesia. The Offer Shares are not being offered in Indonesia through the public media and this Offering Circular is not being delivered or provided to more than 100 persons in Indonesia. The Offer Shares will not be sold to more than 50 persons within Indonesia.

In addition, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or “OJK” formerly known as Capital Market Supervisory Board and Financial Institution/Badan Pengawan Para Modal dan Lembaga Keuangan or “BAPEPAM-LK”) has not declared and will not declare its approval or disapproval of the Offer Shares, nor has it declared or will it declare its views on the accuracy or adequacy of this Offering Circular. Any statement to the contrary is in violation of Indonesian law.

No offer of Offer Shares or invitation to purchase is being made to any person in Malaysia under this Offering Circular except to a person falling within any of paragraphs 2(g)(i) to (xi) of Schedule 5 of the Capital Markets and Services Act 2007 of Malaysia (“CMSA”) by the Selling Shareholders through a holder of a Capital Markets Services Licence who carries on the business of dealing in securities. This Offering Circular does not constitute and may not be used for the purpose of a public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Securities Commission Malaysia under the CMSA.

The Offer Shares are expected to be delivered to purchasers on or about 28 March 2013.

Joint Global Coordinators and Joint Bookrunners

(in alphabetical order)

Co-Lead Managers

(in alphabetical order)

Financial Adviser

25 March 2013

IMPORTANT INFORMATION

This Offering Circular is strictly confidential and is being furnished by PT Matahari Department Store Tbk (the “Company”or“MDS”) in connection with an offering exempt from or in a transaction not subject to, the registration requirements of the US Securities Act, solely for the purpose of enabling a prospective investor to consider the purchase of Offer Shares. You should not reproduce or distribute this Offering Circular, in whole or in part, and should not disclose any contents or use any information in this Offering Circular for any purpose other than considering an investment in the Offer Shares. By accepting delivery of this Offering Circular, you agree to the foregoing. If you are in any doubt about the contents of this Offering Circular, you should consult your stockbroker, bank manager, accountant or legal or financial adviser.

Investors should only rely on the information in this Offering Circular. No person has been authorised to give any information or to make any representations in connection with the Offering, other than those contained in this Offering Circular and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of the Company, the Commissioners, the Directors, Management, the Selling Shareholders, the Financial Adviser, or any of the Joint Global Coordinators and Joint Bookrunners or the Co- Lead Managers or any of their respective affiliates or representatives. No representation or warranty, express or implied, is made by the Financial Adviser, any of the Joint Global Coordinators and Joint Bookrunners or the Co- Lead Managers or any selling agent as to the accuracy or completeness of such information, and nothing contained in this Offering Circular is, or shall be relied upon as, a promise or representation by the Financial Adviser, any of the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any selling agent as to the past, present or future. Without prejudice to any obligation of the Company to publish a supplementary offering circular, neither the delivery of this Offering Circular nor any sale of Offer Shares under the Offering shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Company since the date of this Offering Circular or that the information contained herein is correct as of any time subsequent to its date.

The Selling Shareholders reserve the right to withdraw their offering of the Offer Shares at any time. The Selling Shareholders and the Joint Global Coordinators and Joint Bookrunners also reserve the right to reject any offer to purchase the Offer Shares in whole or in part for any reason and to allocate to any prospective investor less than the full amount of Offer Shares sought by such investor.

None of the Company, the Commissioners, the Directors, Management, the Selling Shareholders, the Financial Adviser, any of the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any of their respective affiliates or representatives is making any representation to any offeree, or purchaser of the Offer Shares regarding the legality of an investment by such offeree or purchaser.

This Offering Circular should not be considered as a recommendation by any of the Company, the Commissioners, the Directors, Management, the Selling Shareholders, the Financial Adviser, any of the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any of their respective affiliates or representatives that any recipient of this Offering Circular should purchase the Offer Shares. Prior to making any decision as to whether to purchase the Offer Shares, prospective investors should read this Offering Circular. Investors should ensure that they read the whole of this Offering Circular carefully and not just rely on key information or information summarised within it. In making an investment decision, prospective investors must rely upon their own examination of the Company and the terms of this Offering Circular, including the risks involved. The contents of this Offering Circular are not to be construed as legal, business or tax advice. Each prospective investor should consult his or her own lawyer, financial adviser or tax adviser for legal, financial or tax advice.

Investors who purchase Offer Shares in the Offering will be deemed to have acknowledged that: (i) they have not relied on any of the Company, the Commissioners, the Directors, Management, the Selling Shareholders, the Financial Adviser, any of the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any of their respective affiliates or representatives in connection with any investigation of the accuracy of any information contained in this Offering Circular or their investment decision; and (ii) they have relied on the information contained in this Offering Circular, and no person has been authorised to give any information or to make any representation concerning the Company or the Offer Shares (other than as contained in this Offering Circular) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, the Commissioners, the Directors, Management, the Selling Shareholders, the Financial Adviser, any of the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any of their respective affiliates or representatives.

Page 1 In connection with the Offering, the Joint Global Coordinators and Joint Bookrunners, the Co-Lead Managers and any of their respective affiliates and representatives, acting as investors for their own accounts, may acquire Offer Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Offer Shares and other securities of the Company or related investments in connection with the Offering or otherwise. Accordingly, references in this Offering Circular to the Offer Shares being offered, acquired, placed or otherwise dealt in should be read as including any offer, acquisition, dealing or placing by the Joint Global Coordinators and Joint Bookrunners, the Co-Lead Managers and any of their respective affiliates and representatives acting as investors for their own accounts. None of the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

In connection with the Offering, UBS AG, Singapore Branch or its affiliates, as Stabilising Manager, or any of its agents, including PT UBS Securities Indonesia, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other stabilisation transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on 26 March 2013 and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares at or above the Offer Price. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted for the Offering. See Section 20 – “Plan of Distribution”.

Each of the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers is acting exclusively for the Selling Shareholders and no one else in connection with the Offering. The Financial Adviser is acting exclusively for Asia Color Company Limited (“ACC”) and Meadow Asia Company Limited (“MAC”) and no one else in connection with the Offering. None of the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners, and the Co-Lead Managers will regard any other person (whether or not a recipient of this Offering Circular) as a client for the Offering and will not be responsible to anyone other than the Selling Shareholders for providing the protections afforded to their respective clients or for the giving of advice for the Offering or any transaction, matter, or arrangement referred to in this Offering Circular. Apart from responsibilities and liabilities, if any, which may be imposed on the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers by law or regulation, none of the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers nor any of their respective affiliates or representatives accepts any responsibility whatsoever for the contents of this Offering Circular or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Selling Shareholders, the Offer Shares or the Offering. Each of the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers and each of their respective affiliates and representatives accordingly disclaim all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this Offering Circular or any such statement. No representation or warranty, express or implied, is made by any of the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or their affiliates or representatives, as to the accuracy, completeness or sufficiency of the information set out in this Offering Circular. By accepting delivery of this Offering Circular, you acknowledge that you have not relied on the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any of their respective affiliates or representatives in connection with your investigation of the accuracy of the information in this Offering Circular or your investment decision.

The Offering does not constitute and shall not be deemed as a public offering in accordance with the Laws of the Republic of Indonesia No. 8 of 1995 regarding Capital Markets and its implementing regulations by or on behalf of the Company, the Selling Shareholders, the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any of their respective affiliates or representatives. No actions have been taken to allow a public offering of the Offer Shares under the applicable securities laws of any jurisdiction, including Indonesia.

This document does not constitute an offer of, or the solicitation of an offer to purchase any of the Offer Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction. There are restrictions on the distribution of this Offering Circular and the making of solicitations pursuant thereto

Page 2 in certain jurisdictions, further details of which are set out under Section 20 – “Plan of Distribution” and Section 21 – “Transfer Restrictions”. Recipients of this Offering Circular are required to inform themselves about and observe any applicable restrictions. Investors should be aware that they may be required to bear the financial risks of an investment in the Offer Shares for an indefinite period of time.

Each purchaser of the Offer Shares must comply with all applicable laws and regulations in force in each jurisdiction in which it purchases, offers or sells such Offer Shares or possesses or distributes this Offering Circular and must obtain any consent, approval or permission required by it for the purchase, offer or sale by it of such Offer Shares under the laws and regulations in force in any jurisdictions to which it is subject or in which it makes such purchases, offers or sales and none of the Company, the Selling Shareholders, the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers or any of their respective affiliates or representatives shall have any responsibility therefore.

Neither the United States Securities and Exchange Commission (the “SEC”), any state securities commission in the United States, nor any other regulatory authority has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Offering Circular. Any representation to the contrary is a criminal offence in the United States.

NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

US INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE

Pursuant to US Internal Revenue Service Circular 230, you are hereby informed that the description in this Offering Circular with respect to US federal tax issues was not intended or written to be used, and such description cannot be used, by any taxpayer for the purpose of avoiding any penalties that may be imposed on the taxpayer under the US Internal Revenue Code. Such description was written to support the promotion or marketing of the Offer Shares. Each taxpayer should seek advice based on their particular circumstances from an independent tax adviser.

AVAILABLE INFORMATION

For so long as any of the Offer Shares are in issue and are “restricted securities” within the meaning of Rule 144(a)(3) under the US Securities Act, the Company will, during any period in which it is not subject to Section 13 or 15(d) under the US Securities Exchange Act of 1934, as amended (the “US Exchange Act”), nor exempt from reporting under the US Exchange Act under Rule 12g3-2(b) thereunder, make available to any holder or beneficial owner of an Offer Share, or to any prospective purchaser of an Offer Share designated by such holder or beneficial owner, the information specified in, and meeting the requirements of Rule 144A(d)(4) under the US Securities Act.

PRESENTATION OF FINANCIAL INFORMATION

Unless otherwise indicated, the audited historical financial statements in the F-pages and the financial information in Section 3 – “Summary Financial Information and Operating Data” and Section 10 – “Selected Financial Information and Operating Data” in this Offering Circular have been prepared and presented in accordance with Indonesian Financial Accounting Standards (“IFAS”). The significant IFAS accounting policies

Page 3 applied to the financial information of the Company have been applied consistently to the financial information in this Offering Circular. IFAS differ from International Financial Accounting Standards (“IFRS”) or generally accepted accounting principles in the United States (“US GAAP”). For a summary of certain differences between IFAS and IFRS, see Section 27 – “Summary of Certain Differences Between IFAS and IFRS”.

None of the financial information used in this Offering Circular has been audited in accordance with auditing standards generally accepted in the United States (“US GAAS”) or auditing standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) or the International Standards on Auditing (“ISA”). It is not possible to express any opinion on the financial statements in the F-pages under US GAAS, the auditing standards of the PCAOB or ISA. In addition, there could be other differences between IFAS auditing standards and those required by US GAAS, the auditing standards of the PCAOB or ISA. Potential investors should consult their own professional advisers to gain an understanding of the financial statements in the F-pages and the implications of differences between the auditing standards noted herein.

The Company’s financial year runs from 1 January to 31 December. This Offering Circular contains the Company’s historical financial statements as at and for the years ended 31 December 2010, 2011 and 2012. Those historical financial statements included elsewhere in this Offering Circular have been audited by KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) in accordance with auditing standards established by the Indonesian Institute of Certified Public Accountants (Institut Akuntan Publik Indonesia or “IAPI”). As a result of the accounting treatment under PSAK No. 38 “Accounting for Restructuring Transactions of Entities Under Common Control” on the Acquisition and Merger described below, the Company’s historical financial statements as at and for the year ended 31 December 2010 present twelve months of PT Meadow Indonesia’s (“MI”) results of operations and cash flows but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations and cash flows. Consequently, the 2010 financial information contained in this Offering Circular (unless otherwise indicated) is presented on a pro forma basis and has been taken, where applicable, from the unaudited pro forma combined financial information of the Company. See Section 9 – “Unaudited Pro Forma Combined Financial Information” which presents the results of MDS’ operations for the full twelve months of the 2010 financial year assuming the Acquisition and Merger described below had been consummated on 1 January 2010. The unaudited pro forma combined financial information of the Company for 2010 is provided for illustrative purposes only and does not purport to present what the actual operations would have been had the Acquisition and Merger actually occurred on 1 January 2010, nor does it purport to represent the results of operations for any future period or any future date.

As described in Section 15 – “Corporate and Shareholding Structure”, on 1 April 2010, MI (a dormant Indonesia- incorporated company) acquired the Company. MI acquired 98% of the Company’s shares from MPP and Pacific Asia Holdings Ltd (the “Acquisition”). Following the Acquisition, a mandatory offer was made by MI in respect of the 2% of the issued share capital of the Company that was held by the public. Upon completion of the mandatory tender offer, MI held 98.15% of the Company’s issued share capital. On 30 September 2011, MI and the Company merged, with the Company as the surviving entity (the “Merger”). MI was dissolved by law. Under IFAS, although MI and the Company had been merged legally on 30 September 2011, the economic and commercial substance of the Merger is seen as being effective from 1 April 2010, the date of the Acquisition. Since both entities were entities under common control at that date, the financial results of MI and MDS have been combined using the book value of such assets and liabilities transferred in the restructuring. Transactions between entities under common control are recognised at book value in the same manner as a business combination that is accounted for using the pooling of interest method as provided for under PSAK No. 38 “Accounting for Restructuring Transactions of Entities Under Common Control”. The difference between the transfer price paid when MI acquired MDS and the book value of MI’s net assets as at the acquisition date arising from the restructuring transactions of entities under common control is recorded under the account “Difference in Value from Restructuring Transactions among Entities Under Common Control” and presented as a component of the equity section in the statement of financial position. In applying such method under PSAK No. 38, the financial statement items of the restructured entities for the period in which the restructuring transactions occur and for any comparative periods disclosed should be presented as if they had been combined from the date the common control exists. Consequently, the pre-acquisition income and expenses of MDS were excluded and the historical audited statement of comprehensive income of the Company for 2010 presented twelve months of MI’s results of operations but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations. See also Section 27 – “Summary of Certain Differences Between IFAS and IFRS”.

The financial information contained in this Offering Circular as at and for the years ended 31 December 2007, 2008 and 2009 has not been audited or reviewed and is from before MDS was a standalone company and was

Page 4 reported on by PT Matahari Putra Prima Tbk (“MPP”) with respect to its Matahari department store division. See Section 15 – “Corporate and Shareholding Structure”. KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) were not engaged to audit, review or apply any procedures to the financial information as at and for the years ended 31 December 2007, 2008 and 2009 disclosed in this Offering Circular.

NON-GAAP MEASURES

See Section 10 – “Selected Financial Information and Operating Data”, Section 11 – “Principal Measures of Financial Performance” and Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a description of certain non-GAAP measures used in this Offering Circular. The non- GAAP measures presented in this Offering Circular are supplemental measures of the Company’s performance that are not required by, or presented in accordance with, IFAS or IFRS and should not be considered as an alternative to net profit, operating profit or any other performance measures derived in accordance with IFAS. They have limitations as analytical tools, and investors should not consider them in isolation from, or as a substitute for, your own analysis of the Company’s financial condition or results of operations, as reported under IFAS. These non-GAAP measures are not standardised terms, hence a direct comparison between companies using such terms may not be possible.

CURRENCY PRESENTATION

Unless otherwise indicated, all references in this Offering Circular to “Rupiah”or“Rp” are to the lawful currency of Indonesia. The Company presents its financial statements in Rupiah, its functional currency. All references to “US dollars”or“USD” are to the lawful currency of the United States.

The Company has translated certain Rupiah amounts in this Offering Circular into US dollars based on the middle exchange rate announced by Bank Indonesia, the Indonesian central bank, as at 7 March 2013, which was Rp9,697 = USD1.00. See Section 5 – “Exchange Rates and Exchange Controls” for further information regarding the rates of exchange between Rupiah and US dollars in recent periods. The Company has provided these US dollar translations solely for the convenience of the reader and the Company makes no representation that the Rupiah or US dollar amounts referred to in this Offering Circular could have been, or could be, converted into US dollars or Rupiah, as the case may be, at any particular rate, the above rate, or at all.

ROUNDINGS

Certain data in this Offering Circular, including financial, statistical and operating information has been rounded. As a result of the rounding, the totals of data presented in this Offering Circular may vary slightly from the actual arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not add up to 100%.

MARKET, ECONOMIC AND INDUSTRY DATA

Unless the source is otherwise stated, the market, economic and industry data in this Offering Circular constitute Management’s estimates, using underlying data from independent third parties. The Company obtained market data and certain industry forecasts used in this Offering Circular from internal surveys, reports and studies, where appropriate, as well as market research, publicly available information and industry publications, including publications and data compiled by Euromonitor International Limited, MarkPlus Insight (in a survey commissioned by the Company) and McKinsey Global Institute. Information contained in this Offering Circular that is from independent market research carried out by Euromonitor International Limited, MarkPlus Insight and McKinsey Global Institute should not be relied upon in making, or refraining from making, any investment decision.

The Company confirms that all such data contained in this Offering Circular has been accurately reproduced and, so far as the Company is aware and able to ascertain, no facts have been omitted that would render the reproduced information inaccurate or misleading. None of the Company, the Commissioners, the Directors, Management, the Selling Shareholders, the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners, the Co-Lead Managers or their respective affiliates or representatives, have independently verified any of the data from third party sources or ascertained the underlying economic assumptions relied upon therein.

Where third-party information has been used in this Offering Circular, the source of such information has been identified.

Page 5 ENFORCEMENT OF CIVIL LIABILITIES

The Company is a limited liability company incorporated under the laws of Indonesia. Most of the Company’s Commissioners, Directors and executive officers reside outside the United States. Investors should assume all of the Company’s assets and a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon the Company or such persons or to enforce against it or any of them. Judgments obtained in the US courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state or territory within the United States.

PT Multipolar Tbk (“Multipolar”), one of the Selling Shareholders, is a limited liability company incorporated under the laws of Indonesia. Most of Multipolar’s commissioners, directors and executive officers, reside outside the United States. Investors should assume all of Multipolar’s assets and the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon Multipolar or such persons or to enforce against it or any of them. Judgments obtained in the US courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state or territory within the United States.

Judgments of US courts based upon the civil liability provisions of the federal securities laws of the United States are not enforceable in Indonesian courts, although such a judgment could be admissible as non-conclusive evidence in a proceeding on the underlying claim in an Indonesian court. There is doubt as to whether Indonesian courts will enter judgments on original actions brought in Indonesian courts based solely upon the civil liability provisions of the federal securities laws of the United States. See Section 4 – “Risk Factors – It may not be possible for investors to effect service of process or to enforce certain judgments on the Company or the Selling Shareholders”.

ACC one of the Selling Shareholders, is a limited liability company incorporated under the laws of the Cayman Islands. All of ACC’s directors and executive officers reside outside the United States. Most of ACC’s assets and the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon ACC or such persons or to enforce against it or any of them. Judgments obtained in the US courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state or territory within the United States.

There is uncertainty as to whether the courts of the Cayman Islands would: (i) recognise or enforce judgments of US courts obtained against ACC or its directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or (ii) entertain original actions brought in each respective jurisdiction against ACC or its directors or officers predicated upon the securities laws of the United States or any state in the United States. A judgment obtained in the federal or state courts of the United States against ACC will be recognised and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

NO INCORPORATION OF WEBSITE INFORMATION

The contents of the Company’s website do not form part of this Offering Circular.

INFORMATION CONTAINED IN THIS DOCUMENT

No person has been authorised to give any information or make any representation in connection with the Offering other than those contained in this Offering Circular and, if given or made, such information or representation must not be relied upon as having been so authorised. Neither the delivery of this Offering Circular nor any sale of the Offer Shares made hereunder shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Company since the date of this Offering Circular or that the information in this Offering Circular is correct as of any time subsequent to the date hereof.

Page 6 INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This document includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Company’s control and all of which are based on Management’s current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as “believe”, “expects”, “may”, “will”, “could”, “should”, “shall”, “risk”, “intends”, “estimates”, “aims”, “targets”, “plans”, “predicts”, “continues”, “assumes”, “positioned” or “anticipates” or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Offering Circular and include statements regarding the intentions, beliefs or current expectations of the Management or the Company concerning, among other things, expansion plans, the results of operations, financial condition, liquidity, prospects, growth, strategies, and dividend policy of the Company and the industry in which it operates. In particular, various statements under the Section 1 – “Summary”, Section 4 – “Risk Factors”, Section 6 – “Dividend Policy”, Section 11 – “Principal Measures of Financial Performance”, Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Section 13 – “Strengths and Strategies”, Section 14 – “Business”, Section 15 – “Corporate and Shareholding Structure”, Section 16 – “Affiliated Transactions”, Section 17 – “Corporate Governance” and Section 18 – “Industry” regarding the Company’s strategy and other future events or prospects are forward-looking statements.

These forward-looking statements and other statements contained in this Offering Circular regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company, including:

Š the Company’s ability to successfully implement its strategy for growth and expansion;

Š economic, social and political conditions in Indonesia;

Š changes in the demographic or retail environment;

Š changes in consumer preferences or fashion trends;

Š changes in rent costs;

Š changes in the competitive landscape;

Š actions by customers and suppliers;

Š labour unrest and other difficulties;

Š increases in regulatory burdens in Indonesia;

Š performance of global financial markets;

Š fluctuations in foreign currency exchange rates; and

Š other risks, uncertainties and factors set forth in this Offering Circular, including under “Risk Factors”.

Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements. Such forward-looking statements contained in this Offering Circular speak only as of the date of this Offering Circular. The Company, the Commissioners, the Directors, Management, the Selling Shareholders, the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners, the Co-Lead Managers and their respective affiliates and representatives expressly disclaim any obligation or undertaking to update these forward-looking statements contained in the document to reflect any change in their expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law or regulation.

Page 7 CONTENTS

PART PAGE

1. SUMMARY ...... 9 2. SUMMARY OF THE OFFERING ...... 11 3. SUMMARY FINANCIAL INFORMATION AND OPERATING DATA...... 14 4. RISK FACTORS ...... 17 5. EXCHANGE RATES AND EXCHANGE CONTROLS ...... 44 6. DIVIDEND POLICY...... 47 7. HISTORICAL PRICE RANGE OF SHARES ...... 49 8. CAPITALISATION AND INDEBTEDNESS ...... 50 9. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ...... 51 10. SELECTED FINANCIAL INFORMATION AND OPERATING DATA ...... 55 11. PRINCIPAL MEASURES OF FINANCIAL PERFORMANCE...... 59 12. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 72 13. STRENGTHS AND STRATEGIES ...... 103 14. BUSINESS ...... 110 15. CORPORATE AND SHAREHOLDING STRUCTURE ...... 135 16. AFFILIATED TRANSACTIONS...... 142 17. CORPORATE GOVERNANCE ...... 148 18. INDUSTRY ...... 157 19. REGULATION ...... 178 20. PLAN OF DISTRIBUTION ...... 181 21. TRANSFER RESTRICTIONS ...... 193 22. TAXATION ...... 195 23. LEGAL MATTERS ...... 200 24. INDEPENDENT PUBLIC ACCOUNTANTS ...... 201 25. KEY FEATURES OF THE SHARES ...... 202 26. INDONESIAN CAPITAL MARKETS ...... 207 27. SUMMARY OF CERTAIN DIFFERENCES BETWEEN IFAS AND IFRS ...... 217 28. ADDITIONAL INFORMATION ...... 219 29. GLOSSARY AND DEFINITIONS ...... 221 INDEX TO FINANCIAL STATEMENTS ...... F-1

Page 8 ------1. SUMMARY ------

MDS is Indonesia’s largest department store operator by retail value sales with a market share of 31.6% of the department store retail sector in 2011 (source: Euromonitor, November 2012). The first Matahari store was opened in October 1958 and MDS pioneered the modern department store concept in Indonesia in 1972. Management believe that the Matahari department store brand, with a heritage of more than 50 years, is a well recognised and trusted department store brand within Indonesia. According to a survey by MarkPlus Insight in December 2012, MDS was the most frequently visited department store in Indonesia for the past five years preceding the survey. With over 2.4 million active members as at 31 December 2012, Management believe that MDS has one of the largest department store loyalty programmes, the Matahari Club Card (“MCC”), in the country.

MDS has increased its Gross Sales from Rp7,907.1 billion in 2010 to Rp9,247.2 billion in 2011 and to Rp10,884.0 billion in 2012, presenting sales growth of 16.9% and 17.7% in 2011 and 2012, respectively. In 2010, 2011 and 2012, the Company’s same store sales growth (“SSSG”) was 11.2%, 13.6% and 11.1%, respectively.

The Company’s strategy is to provide its customers with good value, by offering a large selection of fashionable and quality merchandise at affordable prices, housed in an attractive and modern store environment with a focus on customer service. According to Management, MDS is the only major department store operator that focuses on targeting Indonesia’s large and growing middle-income consumer segment. Management believe that the Company’s broad selection of products allows MDS to appeal to the tastes of all members of a typical middle- income Indonesian family in a single store. As at 31 December 2012, MDS offered more than 90,000 SKUs for its DP Goods, and Management estimate that there are more than 200,000 SKUs of Consignment Goods offered across its stores and product categories including men’s, women’s and children’s clothing, shoes, homeware, cosmetics and accessories. MDS does not sell food or any other perishable products.

MDS generates revenues from the sale of merchandise in its stores. These revenues primarily relate to (i) net revenue from CV Sales and (ii) DP Sales. In 2012, 70.9% of the Company’s Gross Sales were CV Sales and 29.1% were DP Sales. Since consignment vendors maintain their own inventory (owning the merchandise until time of sale) and bear all purchasing, payroll, working capital, distribution, warehousing and certain other costs, the Effective Contribution Margins for Consignment Goods and DP Goods for the Company are similar. Certain premium image brands under consignment, including Polo, Clinique, Revlon, Fladeo, Levi’s, Cardinal, Logo and Executive, have also played an important role in attracting customers to the Company’s stores.

In 2012, 78.8% of DP Sales were branded with MDS’ private label brands including Nevada, Cole, Little M and Connexion. These brands were among the top ten most popular “fashionable affordable clothing brands” in Indonesia, with Nevada ranking number one according to a consumer survey for unaided brand awareness conducted in 2012 by MarkPlus Insight (ahead of brands such as Polo and Levi’s). The Company’s private label brands are sold exclusively at MDS stores and Management believe that these brands play a key role in enabling the Company to differentiate itself from its competitors and make MDS stores an aspirational shopping destination for its customers.

The Company tailors its merchandise mix (including its mix between DP Goods and Consignment Goods) for each store in accordance with the store’s local target market and its judgement of appropriate price points for that market. The Company’s flexibility to customise its stores’ product offering on a store-by-store basis according to regional and/or demographic customer preferences is attributable to a number of factors, including its ability to source merchandise from a large and diverse base of both consignment vendors and direct-purchase suppliers. Approximately 90% of MDS’ merchandise is sourced in Indonesia, allowing MDS to avoid delays associated with the import of goods, respond quickly to changing inventory needs and fashion trends, as well as to limit its exposure to foreign exchange risks and import taxes. MDS has built longstanding relationships with its consignment vendors and direct-purchase suppliers, which has allowed it to benefit from favourable pricing terms and priority in terms of timing and volume of merchandise supplied.

MDS has the most extensive department store network in Indonesia with 116 stores covering a total store space of approximately 750,000 square metres in over 50 cities across Indonesia as at the Latest Practicable Date. MDS stores typically range from 5,000 to 9,000 square metres in size, with the largest store at Pluit Village being slightly over 21,000 square metres.

Page 9 ------1. SUMMARY ------

MDS has a track record of operating profitable stores across its whole range of store sizes and geographic locations in Indonesia. The breadth of its existing logistics network and its ability to vary each store’s merchandise mix provide MDS with flexibility in considering new store sites nationwide. Furthermore, MDS’ strong brand, scale and market leading position make it one of the anchor tenants of choice for real estate developers. Management believe that MDS’ long-standing relationships with leading real estate developers, efficient distribution logistics, local operating knowhow and economies of scale will facilitate its expansion plans.

As a measure of the Company’s success, in June 2011, CNBC ranked the Company as one of the top five fastest growing companies in Asia based on average annual revenue growth from 2005 to 2010. In November 2011, MDS was the winner of Metro TV’s “Pride of Indonesia Company” award in the Indonesian retail sector. In May 2012, MDS won a service quality award from Carre for achieving excellent total service quality satisfaction based on a customer survey. MDS also won the 2011 and 2012 “Top Brand” award in the department store category, as awarded by Frontier Consulting Group and Marketing Magazine.

Page 10 ------2. SUMMARY OF THE OFFERING ------

Company PT Matahari Department Store Tbk., a company incorporated with limited liability under the laws of the Republic of Indonesia.

Selling Shareholders Asia Color Company Limited and PT Multipolar Tbk

The Offering The Offer Shares are being offered by the Selling Shareholders:

(i) through the Joint Global Coordinators and Joint Bookrunners to qualified institutional buyers in the United States in reliance on Rule 144A under the US Securities Act, and

(ii) in offshore transactions as defined by Regulation S under the US Securities Act:

(a) outside Indonesia, Malaysia and the United States through the Joint Global Coordinators and Joint Bookrunners;

(b) in Indonesia, to not more than 100 persons and sold to not more than 50 persons, and are not being offered through the public media, through a private placement; and

(c) in Malaysia through a private placement to persons falling within any of paragraphs 2(g)(i) to (xi) of Schedule 5 of the CMSA, provided that the distribution of such Shares is made by a holder of a Capital Markets Services Licence who carries on the business of dealing in securities.

Over-allotment Shareholder Asia Color Company Limited

Over-allotment Option The Over-allotment Shareholder has agreed to grant to the Stabilising Manager on behalf of the Joint Global Coordinators and Joint Bookrunners, the Over-allotment Option, exercisable in whole or in part, at any time, and from time to time, within 30 calendar days after 26 March 2013 (excluding the Over-Allotment Shares), to acquire up to an additional 175,075,500 Shares (the “Over-allotment Shares”) at the Offer Price. See Section 20 – “Plan of Distribution”.

Offer Price Rp10,850 per Offer Share, excluding a brokerage fee of 1.0% of the Offer Price and applicable transaction fees and levies, which together shall be payable by purchasers of the Offer Shares.

Cornerstone Investors Azentus Global Opportunities Master Fund Limited, BlackRock Asset Management North Asia Limited – Fundamental Equities Portfolio Management Group – APAC Investment Team. Capital Research and Management Company, Employees Provident Fund Board, FIL Investment Management (Hong Kong) Limited, Fullerton Fund Management Company Ltd (a wholly owned subsidiary of Temasek), Goldman Sachs Profit Sharing Master Trust, Gordel Capital Limited, Government of Singapore Investment Corporation Private Limited, GS Investment Strategies, LLC, Hwang Investment Management BHD, Morgan Stanley Investment Management Company, Myriad Opportunities Master Fund Limited, OZ Asia Master Fund, Ltd., OZ Equity Long-Short Master Fund, Ltd., OZ Eureka Fund, L.P., OZ Global Special Investments Master Fund, L.P., OZ ELS Master Fund, Ltd., OZ Master Fund, Ltd, OZEA, L.P., PT Schroder Investment Management Indonesia, Quantum Partners LP and T.Rowe Price Hong Kong Limited.

Page 11 ------2. SUMMARY OF THE OFFERING ------

The Cornerstone Investors will purchase Offer Shares from ACC at the Offer Price. This represents approximately 33% of the Offer Shares (excluding the Over- allotment Shares).

Shares Outstanding As at the date of this Offering Circular, the Company’s authorised share capital is Rp486,114,048,000 divided into 3,911,120,640 Shares. The Company’s issued share capital is 2,917,918,080 Shares consisting of 6,168,960 type A Shares with a nominal value of Rp5,000 per share, 259,096,320 type B Shares with a nominal value of Rp350 per share and 2,652,652,800 type C Shares with a nominal value of Rp100 per share.

There are no differences in the rights afforded to holders of type A, type B and type C Shares, including with regard to voting rights, rights to receive dividends, and rights upon liquidation where they all participate pari passu on a per Share basis despite the differences in nominal value. Each of these types of Shares is fungible with each other and trade on the IDX under the same symbol of “LPPF”. Purchasers of Shares in the Offering may get one or a combination of each type of Shares. Each of the type A Shares, type B Shares and type C Shares ranks pari passu under Indonesian law. See Section 25 – “Key Features of the Shares” for more detailed information on the Shares and their nominal values.

Listing of the Shares The Offer Shares offered in this Offering are listed on the IDX under the symbol “LPPF”.

Share Ownership Immediately following completion of the Offering, but prior to the exercise of the Over-allotment Option, the Selling Shareholders will own 58.15% of the Company’s total outstanding Shares.

Lock-up Except pursuant to the Offering (including pursuant to the exercise of the Over- allotment Option), the Reorganisation and a Permitted Disposal (as defined below) by a Selling Shareholder or MAC, the Company, the Selling Shareholders and MAC have agreed with the Joint Global Coordinators and Joint Bookrunners not to, for a period of six months following completion of the Offering (the “Lock-up End Date”) without the prior written consent of the Joint Global Coordinators and Joint Bookrunners: (A) issue (in the case of the Company), offer, sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any option, warrant, contract or right to purchase, grant or purchase any option, warrant, contract or right to sell, or otherwise transfer or dispose of or create an encumbrance over, or agree to transfer or dispose of or create an encumbrance over, either directly or indirectly, conditionally or unconditionally, any Shares or securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase any Shares (collectively, the “Locked-up Securities”) or any interest in any of the foregoing; (B) deposit any Locked-up Securities in any depositary receipt facilities, whether such transaction described above is to be settled by delivery of Shares or other securities, in cash or otherwise; (C) enter into any swap, hedge or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Locked-up Securities, whether such swap, hedge or transaction is to be settled by delivery of Shares or other securities, in cash or otherwise; or (D) or publicly announce any intention to enter into, any transaction described in paragraphs (A), (B) or (C) above, whether any such transaction described in clauses (A), (B) or (C) above is to be settled by delivery of Shares or other securities, in cash or otherwise. A “Permitted Disposal” is, in respect of the Selling Shareholders and MAC only, (i) an acceptance of a general offer for the Shares of the Company (“MTO”) made by a new controlling shareholder in accordance with the Bapepam-LK Rules No. IX.H.1 (the “Indonesia Take-over

Page 12 ------2. SUMMARY OF THE OFFERING ------

Code”) to be followed by the sale of the Shares to the new controlling shareholder during the MTO period (within the meaning of the Indonesia Take-overs Code; (ii) the distribution of all of the Shares held by ACC to MAC, provided that all such Shares continue to be Locked-up Securities for the reminder of the period to the Lock-Up End Date; (iii) the sale of all of the Shares held by ACC or MAC (as applicable) to a strategic purchaser, provided that the relevant seller procures as a condition of the sale that the purchaser enters into a lock up undertaking with the Underwriters for the remainder of the period to the Lock-Up End Date on substantively same terms as above or (iv) any transaction that is required by applicable law. See Section 20 – “Plan of Distribution”.

Use of Proceeds As the Offering consists solely of Offer Shares offered by the Selling Shareholders, the Company will not receive any proceeds from the Offering.

Voting Rights Owners of the Offer Shares offered in this Offering will be entitled to the same voting rights as other holders of Shares. Each Share is entitled to one vote at a general meeting of Shareholders, regardless of whether they are type A Shares, type B Shares or type C Shares.

Dividends The declaration, amount and payment of future dividends on the Shares, if any, is discretionary and will be subject to the recommendation of the Board of Directors and approval of the Shareholders, in a general meeting of Shareholders. See Section 6 – “Dividend Policy”.

Payment Payment to the Selling Shareholders for the Offer Shares is expected to be made on or about 28 March 2013, in immediately available funds.

Delivery Delivery of the Offer Shares to successful applicants will be made against payment through the depository facilities of the Indonesian Securities Depositary Company, KSEI. See Section 26 – “Indonesian Capital Markets” and Section 20 – “Plan of Distribution”. It is expected that the Offer Shares will be delivered on or about 28 March 2013.

Price Range of the Offering The indicative price range of the Offering was Rp10,000 to Rp11,250 per Offer Share.

Trading in Shares Trading of the Shares on the regular market of the IDX has been suspended since 22 March 2013. The closing price per Share on the regular market of the IDX on 21 March 2013 was Rp4,200. The Offer Price is Rp10,850. Given the disparity between these two prices, MDS expects that trading of Shares on the regular market will re-open on Tuesday, 26 March 2013 at the Offer Price. If for any reason the quoted price of the Shares on the regular market is not re-set at the Offer Price when trading recommences, the IDX auto rejection rules would apply to the quoted stock price of the Shares, which would prevent investors from trading the Shares at the Offer Price on the regular market of the IDX until the quoted stock price reaches a level of at least Rp9,042 and would result in the quoted stock price of the Shares on the regular market being materially below the Offer Price. See Section 26 – “Indonesian Capital Markets – IDX Auto Rejection Regulations”.

Transfer Restrictions The Offer Shares will be subject to certain transfer restrictions as described in Section 20 – “Plan of Distribution” and Section 21 – “Transfer Restrictions”.

Tax Considerations See Section 22 – “Taxation” for further information on the tax consequences of the purchase, ownership and disposition of the Offer Shares.

Risk Factors Prospective investors should carefully consider the risks connected with an investment in the Offer Shares, certain of which are discussed in Section 4 – “Risk Factors”.

Page 13 ------3. SUMMARY FINANCIAL INFORMATION AND OPERATING DATA ------

You should read the summary financial information presented below in conjunction with the historical financial statements and the notes to those financial statements included elsewhere in this Offering Circular. You should also read “Important Information – Presentation of Financial Information”, Section 9 – “Unaudited Pro Forma Combined Financial Information”, “Section 11 – “Principal Measures of Financial Performance” and Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The following summary historical financial information of the Company as at the dates and for each of the periods indicated are derived from the Company’s audited financial statements as at and for the years ended 31 December 2010, 2011 and 2012, included elsewhere in this Offering Circular, which have been audited by KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network), independent public accountants in Indonesia.

The following table also sets forth the Company’s summary unaudited pro forma combined statement of comprehensive income for the year ended 31 December 2010. The summary unaudited pro forma combined statement of comprehensive income has been prepared to give effect to the acquisition and merger between the Company and MI and based on the assumptions and adjustments described in the notes to the unaudited pro forma combined statement of comprehensive income. The Company has prepared and presented the unaudited pro forma combined statement of comprehensive income as if the acquisition and merger had occurred on 1 January 2010. The unaudited pro forma combined financial information of the Company for the year ended 31 December 2010 are provided for illustrative purposes only and is not necessarily indicative of either future results or the results that might have been recorded if such transactions had been consummated on such date. The following unaudited pro forma combined financial information has not been prepared or presented in compliance with the published guidelines of Article 11 of Regulation S-X promulgated by the SEC for the preparation and presentation of pro forma financial information. As a result, US investors should not rely on this unaudited pro forma combined financial information. See Section 9 – “Unaudited Pro Forma Combined Financial Information”.

The historical financial statements included elsewhere in this Offering Circular have been prepared and presented in accordance with IFAS, which differs in certain material respects from IFRS. See Section 27 – “Summary of Certain Differences between IFAS and IFRS”.

Page 14 ------3. SUMMARY FINANCIAL INFORMATION AND OPERATING DATA ------

SUMMARY STATEMENTS OF COMPREHENSIVE INCOME INFORMATION Years ended 31 December Proforma 2010 2010 2011 2012 (Rp billions) Net revenue ...... 4,091.0 3,316.7 4,700.7 5,616.9 Cost of revenue ...... (1,468.4) (1,173.4) (1,595.2) (1,910.8) Gross profit ...... 2,622.5 2,143.3 3,105.5 3,706.1 Selling expenses ...... (805.5) (627.5) (912.9) (1,049.6) General and administrative expenses ...... (817.7) (619.5) (937.4) (1,082.6) Other gains/(losses) – net ...... (204.0) (203.3) (13.9) 10.4 Operating profit ...... 795.5 693.0 1,241.3 1,584.3 Finance expense – net ...... (535.6) (415.8) (505.7) (425.3) Profit before income tax ...... 259.9 277.2 735.6 1,159.0 Income tax expense ...... (238.9) (214.6) (269.9) (388.1) Net profit ...... 21.0 62.6 465.7 770.9 Other comprehensive income/(loss) Difference in value from restructuring transactions among entities under common control...... (3,767.1) (3,767.1) - - Reversal of difference in value from restructuring transactions among entities under common control ..... 210.8 210.8 - - Comprehensive income/(loss) ...... (3,535.3) (3,493.7) 465.7 770.9

SUMMARY STATEMENTS OF FINANCIAL POSITION INFORMATION As at 31 December 2010 2011 2012 (Rp billions) Total current assets ...... 1,524.3 1,567.3 1,744.3 Total non-current assets ...... 720.9 855.1 1,185.5 Total assets ...... 2,245.2 2,422.4 2,929.8 Total current liabilities ...... (1,451.7) (1,708.3) (2,170.2) Total non-current liabilities ...... (3,959.1) (3,416.5) (2,691.1) Total liabilities ...... (5,410.8) (5,124.8) (4,861.3) Total equity ...... 3,165.6 2,702.4 1,931.5 Total liabilities and equity ...... 2,245.2 2,422.4 2,929.8

Note: On 4 March 2013, the Company prepaid Rp700.0 billion of its indebtedness under its syndicated loan facilities. On 5 March 2013, the Company drew down Rp250.0 billion on its revolving credit facility.

SUMMARY STATEMENTS OF CASH FLOW INFORMATION Years ended 31 December 2010(1) 2011 2012 (Rp billions) Net cash flows provided from operating activities ...... 1,283.7 1,223.7 1,599.8 Net cash flows used in investing activities...... (7,918.4) (260.5) (512.8) Net cash flows generated from/(used in) financing activities...... 7,670.0 (1,042.4) (1,004.0) Net increase/(decrease) in cash and cash equivalents ...... 1,035.3 (79.2) 83.0 Cash and cash equivalents at the beginning of the year ...... - 1,035.3 956.1 Total cash and cash equivalents at the end of the year ...... 1,035.3 956.1 1,039.1 Restricted cash and cash equivalents ...... (36.1) (37.1) (39.2) Cash and cash equivalents at 31 December ...... 999.2 919.0 999.9

(1) Representing the cash flows of the Company for April – December 2010.

Page 15 ------3. SUMMARY FINANCIAL INFORMATION AND OPERATING DATA ------

SUMMARY PRINCIPAL MEASURES OF FINANCIAL PERFORMANCE

The summary principal measures of financial performance set out below is described in Section 11 – “Principal Measures of Financial Performance.”

Years ended 31 December 2010 2011 2012 (Rp billions, unless otherwise stated) Gross Sales ...... 7,907.1 9,247.2 10,884.0 Adjusted Gross Profit ...... 2,633.2 3,116.2 3,685.3 Adjusted Gross Profit Margin (%) ...... 33.3 33.7 33.9 Adjusted Operating Expenses ...... 1,590.4 1,797.0 2,046.8 Adjusted EBIT ...... 1,042.7 1,319.2 1,638.5 Adjusted EBIT Margin (%) ...... 13.2 14.3 15.1 Adjusted EBITDA ...... 1,184.9 1,478.8 1,818.6 Adjusted EBITDA Margin (%) ...... 15.0 16.0 16.7 Adjusted EBITDAR ...... 1,746.1 2,108.2 2,513.1 Adjusted EBITDAR Margin (%) ...... 22.1 22.8 23.1 SSSG (%) ...... 11.2 13.6 11.1 Gross Sales per square metre of Retail Space (Rp thousands) ...... 13,165 14,461 15,466

Current trading

Trading update

For the purposes of this trading update, SSSG is defined as Gross Sales for the period of January and February 2013 for stores which had been in operation for at least one complete calendar year as at 1 January 2013 against comparable Gross Sales at those same stores in January and February 2012. KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) were not engaged to audit, review or apply any procedures to the financial information in this section.

Total Gross Sales for January and February 2013 increased 15.3% from the comparable prior period in 2012. SSSG was 10.3% for the period through 28 February 2013, despite the month of February having one fewer day in 2013 than in 2012.

Total Gross Sales for January increased 2.4% compared to the same period in 2012, with SSSG down slightly against last year as expected, primarily due to Chinese New Year shifting from January in 2012 to February in 2013. Although sales in the Greater Jakarta area were adversely affected by weather conditions, including two stores being closed for a short period of time, sales recovered strongly in February 2013 and ended the month with a year to date SSSG of 9.6% in Greater Jakarta. Management is pleased with current performance and has a positive outlook for 2013.

Debt position

MDS has also negotiated an amendment of its syndicated loan facilities on 1 March 2013. The amendment provides for the release of security that had been provided by certain shareholders of MDS over their MDS shares and a change to the definition of Change of Control used in the facilities agreement. The amended facilities agreement also provides for a reduction in the percentage excess cash flow that must be used to prepay the loans under the facilities to 30%. In connection with the amendment of the syndicated lending facilities, a voluntary prepayment of Rp700.0 billion was made by MDS on 4 March 2013. See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Factors Affecting the Company’s Results of Operations – Bank borrowings and interest rates” and “– Senior Facilities Agreement.”

On 5 March 2013, the Company drew down Rp250.0 billion on its revolving credit facility.

Page 16 ------4. RISK FACTORS ------

An investment in the Offer Shares involves significant risks. You should consider carefully all of the information contained in this Offering Circular, especially the following risk factors, in evaluating whether to purchase the Offer Shares. Additional risks not presently known to Management or that they currently deem to be immaterial may also have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects in the future. The market price of the Offer Shares could decline due to any one of these risks and you may lose all or part of your investment.

RISKS RELATING TO BUSINESS

The Company’s financial performance is affected by retail market and economic conditions in Indonesia

The Company’s business is significantly affected by general and local retail market and economic conditions outside its control. Many of the Company’s goods represent discretionary purchases. Accordingly customer demand for these goods is subject to decline during periods where consumer confidence or purchasing power is negatively affected, for example, during a recession. The following, which is not meant to be comprehensive, historically has had, and could have, a material adverse effect on Indonesian retail industry conditions:

Š adverse developments in the financial condition of any of the large department store operators or other retailers;

Š ongoing consolidation in the Indonesian retail industry;

Š domestic, regional or global economic changes;

Š changes in the size and disposable income levels of Indonesia’s middle-income segment (defined by Management as the segment whose consumption expenditure is between Rp0.7 million to Rp4.5 million per capita, per month in Indonesia – see Section 18 – “Industry”);

Š changes in inflation in Indonesia;

Š the timing and costs associated with property improvements and rentals, including changes in rent;

Š unexpected weather conditions;

Š changes in global commodity prices;

Š changes in labour costs and regulations affecting labour costs;

Š changes in taxation and zoning laws; and

Š adverse government regulations.

If the Indonesian retail industry is affected by any of these or other factors, the Company may be faced with decreased Gross Sales, increased costs and decreased margins which may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s planned expansion programme may not proceed as expected

As part of the Company’s growth strategy, it plans to further enhance its leading position in Indonesia by expanding its store network. The Company opened 13 new stores in 2012 with 15 store openings expected in 2013 and approximately a further 15 stores per year in 2014 and 2015. The Company expects to fund its expansion with existing cash and cash flow from existing operations. The Company may not be able to achieve its planned expansion objectives, and any new stores opened by the Company may not be successful or meet the expectations underpinning the Company’s decision to open the store. The rate of expansion may strain the Company’s resources and systems including its management’s time, reporting system, management controls and

Page 17 ------4. RISK FACTORS ------logistics systems. In addition, the expansion by the Company into other new locations may increase the distribution costs that the Company will incur. This may in turn hinder the implementation of any further expansion plans and minimise the potential benefits that are expected to accrue to the Company from greater economies of scale. The expansion programme also has the potential to negatively impact the operation of existing stores. Successful opening and operation of the new stores are dependent on several factors (some of which are not under the Company’s control), including:

Š ability to identify suitable sites for new stores and successfully negotiate lease arrangements on terms acceptable to the Company;

Š successful integration of the new stores with the Company’s existing operations and the achievement of related synergies and economies of scale;

Š extending contracts and obtaining favourable terms from the Company’s suppliers, consignment vendors and logistics service providers;

Š hiring, training and retaining skilled personnel and expanding the capacity of the Company’s management information systems whilst simultaneously coordinating with the Company’s suppliers to ensure an adequate supply of quality goods;

Š maintenance of a successful and cost effective logistics management system;

Š developing and executing specific business strategies for each store;

Š closely monitoring the performance of the new stores and adjusting product mix to match customers’ preferences;

Š ensuring new stores achieve similar SSSG as existing stores despite variances in size, layout and location;

Š effectiveness of the Company’s marketing campaigns; and

Š obtaining the necessary regulatory approvals and permits in a timely manner.

If the Company chooses to expand into premises that have higher rent than the rent it pays on average (for example, because such premises are the only ones available), there will be an increase in costs which might result in lower profitability for the Company. If a developer is unable to deliver a new premise on time, the opening of a new store may be delayed which may prevent the Company from achieving its expected level of profitability (in respect of the new store) in its expected timeframe.

Opening new stores could result in the diversion of sales from the Company’s existing stores. New stores typically generate operating profit within the first year, and repay their capital investments within three to four years. Any failure by the Company’s new stores to achieve the Company’s expected level of profitability within the Company’s expected timeframe, or at all, may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects. See also the risk factor below titled “The growth of the Company’s business depends on its ability to identify properties in appropriate locations and secure leases for new stores on acceptable terms”.

The Company is dependent on the strength of the Matahari brand

The strength of the Matahari brand stems from the Company’s reputation for providing high-quality, fashionable and affordable goods. The Company has granted Mr. Hari Darmawan, the founder of the Matahari department store business, limited rights to use (and grant licenses to use) certain MDS trademarks in relation to the following business activities: (i) Taman Wisata Matahari (waterparks); (ii) Matahari Caritaria (leisure centres); (iii) Rumah Matahari (hardware); and (iv) Matahari Foodcourt. As the word “Matahari” means “sun” in Bahasa, the Company does not have ownership rights over the word itself as a matter of practicality, but it owns all of the

Page 18 ------4. RISK FACTORS ------

“Matahari” trademarks across various classes including those of fabrics, clothing and advertising. As MPP has the word “Matahari” in its name, any adverse events or developments in connection with MPP’s operations may have an adverse effect on the “Matahari” reputation. The Company’s continued success and growth depends upon its ability to protect and promote the “Matahari” brand via its marketing and promotional efforts. The Company may not be aware of all infringements against its trademarks and/or may decide on grounds of cost and expediency not to prevent instances of infringement. The use or misuse of the “Matahari” name or the Company’s trademarks (including by Mr. Hari Darmawan and/or MPP) may harm the Company’s image and business reputation. If the Company’s marketing or advertising campaign failed or was deemed to be inappropriate, the Company’s brand image and its reputation may be negatively affected. If the Company fails to successfully protect and promote its brand, the market perception of the Company’s stores may deteriorate which may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s financial performance is affected by the strength and profitability of its private label goods

A significant part of the Company’s Gross Sales is derived from sales of its popular private label goods. The Company’s DP Sales (which includes private label goods) amounted to Rp2,369.3 billion, Rp2,618.1 billion and Rp3,171.9 billion, respectively, in 2010, 2011 and 2012, which accounted for 30.0%, 28.3% and 29.1% of Gross Sales for such periods. Product defects, counterfeit goods and ineffective or inappropriate promotional activity are all potential threats to the strength of the private label goods. If the Company fails to successfully protect and promote its private label goods, the market perception of these goods may deteriorate and the Company may not be able to maintain its current prices for its private label goods and/or sales volumes or employ their private label brands to introduce new goods or enter new product categories. Rising costs for suppliers of private label goods may increase the cost at which the private label goods are supplied to the Company. If the Company increases its price points for its private label goods to maintain margin levels, this may have a negative impact on Gross Sales. Any of these changes may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company relies on its consignment sales for a substantial portion of its Gross Sales and net revenues

The Company’s continued success depends on its ability to retain existing, and attract new, consignment vendors with popular Consignment Goods that fit the Company’s brand image and target market, on terms favourable to the Company. A substantial portion of the Gross Sales of the Company are CV Sales. CV Sales amounted to Rp5,537.8 billion, Rp6,629.1 billion and Rp7,712.1 billion, respectively, in 2010, 2011 and 2012, which accounted for 70.0%, 71.7% and 70.9% of Gross Sales for such periods.

The Company’s operating profit is dependent on the net revenue it earns from its Consignment Goods. If a consignment vendor reduces the consignment margins paid to the Company, the Company’s net revenue and operating profit may decrease. Consignment margins may decrease as a result of an increasingly competitive retail landscape and increasing cost of suppliers. The Company may not be able to successfully renew its existing agreements with its consignment vendors on terms acceptable to the Company, or at all. Although the Company has long standing relationships with many of its consignment vendors, contracts between the Company and its consignment vendors are generally short term contracts and are therefore subject to regular renewal and renegotiation. If the Company loses the exclusivity of a Consignment Good and the Consignment Good is supplied to competitors’ department stores, this may adversely affect the Company’s business, cash flows, operational results, financial condition and prospects.

Sales of Consignment Goods depend, in large part, on the marketing and promotional efforts of the consignment vendors. If the consignment vendors’ marketing and promotion efforts are not successful and the Consignment Goods lose popularity, the net revenue of the Company as well as the “Matahari” department store brand may be adversely affected. If any of these risks materialise, it may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

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The success of the Company is dependent upon its ability to provide goods that meet its customers’ expectations and to respond to changes in demand

The Company maintains a comprehensive selection of goods to cater for the customers in its target segment and to provide them with more choices. The success of the Company’s business depends on its ability to anticipate changing trends, maintain a comprehensive selection of goods perceived as being of “good value” by customers and promptly respond to changing trends, customer demographics and preferences, the availability of new goods and the increasing pace at which preferences evolve. This is particularly true for fashion trends which change at a rapid pace, and makes it difficult to accurately predict sales and to promptly deliver suitable goods.

Customer acceptance of new goods is affected by a number of factors, including prevailing economic conditions, disposable income, global lifestyle trends, price, value, quality, functionality and appearance. It is possible that some of the goods the Company offers will not achieve widespread consumer acceptance, may become outdated or be superseded by more popular goods. A failure by the Company to accurately and quickly anticipate, identify and adjust to changing consumer demands may result in the Company carrying brands or goods which are superseded by more popular goods. Similarly, the Company may fail to maintain an optimal product mix which responds successfully and effectively to target customer preferences. Any such failure may erode customer confidence by alienating customers who are unable to locate their desired goods and/or brands in the Company’s stores. If any of these risks materialise, it may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s business depends on the disposable income of its customers and the ability of the Company’s business to grow depends upon the growth of the middle-income consumer base

The Company’s target demographic is Indonesia’s fast growing middle-income consumer base. If the disposable income levels of the Company’s middle-income customer base and/or the population size of that base declines, stagnates or does not grow as anticipated, customers may shop less and spend less at the Company’s stores which may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s business is subject to significant fluctuations due to seasonality

The Company’s Gross Sales are affected by seasonality. The most important trading periods for the Company in terms of Gross Sales are the Lebaran, ‘back to school’ (which occurs between June and July), Chinese New Year and Christmas shopping seasons, and the Company typically increases its marketing efforts in the run up to these holidays or events. Gross Sales during the 44-day traditional celebration period preceding Lebaran in aggregate amounted to 24.9%, 25.1% and 25.3% of total Gross Sales in 2010 (30 July – 11 September), 2011 (19 July – 31 August) and 2012 (8 July – 20 August), respectively, making Lebaran the single most significant seasonal period for the Company. The Company incurs additional expenses in advance of its peak periods in anticipation of higher Gross Sales, including in relation to additional advertising or promotional campaigns and additional staff costs. In respect of DP Goods, the Company usually orders additional goods in advance of peak selling periods. All employees in Indonesia also receive an allowance of one month’s salary prior to Lebaran in accordance with Indonesian labour laws. Any decrease in Gross Sales or margins during the peak sales periods, decrease in working capital in the periods leading up to such periods or failure to accurately predict sales volumes for such periods may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects. For more information see – “The Company may not accurately manage its inventory of DP Goods” below.

The date of Lebaran is dependent on the lunar calendar and changes each year (occurring between July and September each year during the period under review). The period of increased Gross Sales before Lebaran may therefore fall in different financial quarters. The pre-Lebaran sales period may also coincide with the ‘back to school’ period (another of the Company’s peak sales periods) which may result in peak season cannibalisation. As a result of the movement in Lebaran dates, the Company’s quarterly results may also not be a reliable indicator of the Company’s full year results, or of the Company’s operational and financial condition. Results of a given interim financial period may or may not be comparable to results from the preceding interim period or to the corresponding period in prior years. Any seasonal fluctuation reported in the future may not match the expectations of investors and may cause the trading price of the Shares to fluctuate.

Page 20 ------4. RISK FACTORS ------

The Company may not accurately manage its inventory of DP Goods

The Company must maintain sufficient levels of DP Goods to operate its business successfully. If the Company over-forecasts sales volumes, it may be unable to adjust its expenses in a timely fashion, be left with a substantial amount of unsold DP Goods and have to rely on markdowns to dispose of the unsold inventory. If the Company under-forecasts sales volumes or the time it will take to obtain new inventory, it may not have an adequate supply of DP Goods to meet consumer demand which will result in missed sales, erode customers’ confidence in their ability to buy what they want from the Company’s stores and could cause the Company reputational damage or adversely affect its business, cash flows, operational results, financial condition and prospects.

The Company is operating in an increasingly competitive retail landscape

The Indonesian retail industry is becoming increasingly competitive. The Company faces increased competition from existing department stores and specialist retailers and from new entrants to the markets in which it operates, including international retailers currently only operating in offshore markets but who are targeting the Company’s customer base. See Section 18 – “Industry”. Increasing competition has resulted in the Company facing the following competitive challenges:

Š quickly anticipating and responding to changing consumer demands ahead of its competitors. This includes purchasing and/or obtaining on consignment the optimal mix of goods;

Š maintaining favourable brand recognition and effectively marketing the Company’s stores and private label brands to consumers;

Š sourcing goods efficiently at the correct quality and price points and selling Consignment Goods of reputable brands at the Company’s stores;

Š agreeing and maintaining arrangements with consignment vendors and suppliers of DP Goods on attractive terms;

Š obtaining desirable store locations;

Š introduction of more innovative store formats or retail sales methods; and

Š increased operational efficiencies of competitors allowing competitors to price more aggressively.

Actions taken by the Company’s competitors (including aggressive pricing strategies) and the reciprocal actions taken by the Company can place pressure on its margins and profitability. Some of the Company’s competitors may have access to greater financial resources or economies of scale, or may be able to source their goods from lower-cost suppliers, and therefore have a lower cost base, or have greater operational efficiencies, which may give the competitors a competitive advantage. Increasing competition from foreign retailers and new market entrants could further erode the Company’s market share. These competitive forces may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s performance may be affected by the performance of the malls in which its stores are located

The majority of the Company’s stores are located in malls containing other retail or food and beverage outlets. The number of potential customers patronising the Company’s stores is impacted by the volume of consumers in the malls in which the Company’s stores are located. If a particular mall proves to be or becomes less popular for reasons outside the Company’s control (for example, due to the opening of a nearby mall, the increasing popularity of another existing mall, shifting demographics, the developer’s failure to maintain the mall in a good, clean condition or the absence of complementary or sufficiently attractive retail and/or food and beverage outlets in the mall), the number of customers patronising the Company’s stores may not reach expected numbers and/or decline which may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

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The Company may not be able to renew the leases of its properties on acceptable terms or at all, may be subject to increased rental costs and may be required to close stores for reasons outside of its control

All of the Company’s stores are leased. On expiry of each lease, the Company must renegotiate the lease with the relevant landlord. The Company is in the process of renewing a small number of leases which have recently expired. If the Company is unable to renegotiate the lease on acceptable terms, or at all, the store may be forced to close or relocate. A store may also be forced to close or relocate due to other reasons outside of the Company’s control, such as fire, other natural disasters, the closure of a mall, changes in zoning laws or changes in government regulation on leased space. Relocation of any of the Company’s stores may cause disruption to business and require significant expenditure. In addition, the Company may not be able to find suitable alternative premises on acceptable terms, or at all. Taking into account options available to the Company to renew existing leases, leases in respect of 24% of the Company’s stores are due to expire within the next five years, 19% within six to ten years and 57% in more than 10 years. The Company incurred rent expenses (including rent and service charges related to its stores, headquarters and distribution centre) of Rp561.2 billion, Rp629.4 billion and Rp694.5 billion in 2010, 2011 and 2012 respectively. Rent expenses in Indonesia are expected to increase given the predicted strong economic growth, increasing urbanisation and affluence of the population in Indonesia.

Any increase in rental costs, inability to renew leases or extend the lease period on acceptable terms or closure of any stores for any reason may require the Company to relocate its stores, resulting in business interruption and additional relocation costs and/or may result in increased rental costs. These factors may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The growth of the Company’s business depends on its ability to identify properties in appropriate locations and secure leases for new stores on acceptable terms

The Company is not able to open new stores without securing leases for appropriate properties on acceptable terms, and the Company’s success depends to a significant extent on the location of its stores. New stores should be in prime and convenient locations with high population density, customer flow and potential for customer growth. The Company faces strong competition in identifying and securing such locations, due to the lack of suitable available sites, the lack of prime locations in existing malls, as well as increased competition from other retail players seeking similar locations. In addition, mall developers may face problems or delays in obtaining sufficient financing or planning approvals for the building of new malls, or securing prime locations for new malls with suitable surrounding infrastructure and facilities. For example, there is currently a moratorium on the issuance of permits for new malls in central Jakarta. If developers build fewer new malls or are not able to complete existing developments at all or on time, there may be a shortage of space available to the Company for the establishment of new stores. If the Company fails to secure leases for appropriate properties for its new stores on acceptable terms, or at all, this may have a material adverse effect on the Company’s prospects and future growth. If it has to pay higher than expected rents for new stores this will result in increased rental costs which may have a material adverse effect on the Company’s cash flows, operational results, financial condition and prospects. For more information on the planned stores expansion, see Section 14 – “Business – New store roll- out and expansion”.

The Company is dependent on the reliability of its direct-purchase suppliers and its consignment vendors

As at 31 December 2012, Consignment Goods and DP Goods were sourced from over 1,200 consignment vendors and direct-purchase suppliers. The projected growth of the Company’s business will increase its demand for goods and continue to put pressure on its suppliers and consignment vendors to increase production. The Company may also be indirectly affected by macroeconomic or regulatory changes that may affect its key suppliers and consignment vendors. Should the Company’s supply of goods be disrupted (for example, due to adverse weather conditions such as flooding, an inability by the direct purchase suppliers or consignment vendors to obtain shipments in a timely manner, the shortage of popular items, additional costs for delivery of goods required on short notice, or otherwise) or if product quality is not maintained, the Company may fail to procure an alternate source of supply of goods in time to meet its customers demands or to procure goods of equal quality on equally competitive terms, if at all. Any such disruption to the Company’s supply of goods may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

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The Company’s reputation may be affected by the conduct of its direct-purchase suppliers and consignment vendors

The Company does not control all actions taken by its suppliers or consignment vendors and does not take steps to ensure that its suppliers or consignment vendors are not involved in conduct that is in breach of a law or regulation (for example, by using child labour or not providing employees with a safe working environment). Any breach of law or regulation or other issues concerning a supplier or consignment vendor may affect the Company’s reputation through association with the supplier or consignment vendor’s goods. If any of the Company’s suppliers or consignment vendors are found to be in breach of law or regulation, the Company may be required to redirect outstanding purchase orders with such supplier or consignment vendor to other suppliers or consignment vendors, or if such option is not available, discontinue the product offering until an alternative supplier or consignment vendor is secured for the product, which may limit the Company’s product range. Such reputational damage or discontinuance of a product may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s distribution channels are subject to logistical challenges and the Company is dependent on the reliability of its distribution channels and the distribution channels used by third party suppliers

Given the disparate locations of the Company’s stores, the weather conditions that affect Indonesia (including frequent landslides and flash floods) and the overall standard of Indonesian infrastructure, the Company may face logistical challenges managing the distribution of its goods to its stores. The Company operates one central distribution centre on which it is reliant for the timely and accurate distribution of its DP Goods to its stores. The Company also provides distribution services to third parties (primarily being the Company’s consignment vendors). The Company is reliant on third party carriers and forwarding agents for distributions to certain locations in Indonesia, especially during peak periods. The Company’s other consignment vendors rely on third party carriers to deliver goods to the Company’s distribution centre, other warehouses and/or stores. Any disruption to the distribution centre or the distribution channels used by the Company and consignment vendors could result in delayed or lost deliveries, damaged goods or an inadequate supply of goods to the Company’s stores. Events such as domestic or foreign labour strikes, natural disasters, work stoppages or boycotts affecting the transportation sector could increase the cost, or reduce the supply, of goods available to the Company (whether provided through the Company’s own distribution centre or those of third parties). As the Company expands, the increasing volume of goods to be distributed may place additional pressure on existing distribution channels which are already hampered by factors including poor infrastructure (inadequate seaports, roads and power supplies) and logistical challenges and which will need to be expanded accordingly. These factors may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company is reliant on the Java retail markets

The Company’s Gross Sales are concentrated in the Java retail markets. The Gross Sales generated from the Company’s stores in Java in aggregate amounted to Rp4,962.2 billion, Rp5,769.4 billion and Rp6,736.5 billion, in 2010, 2011 and 2012, respectively, which accounted for 62.8%, 62.4% and 61.9% of Gross Sales for such periods. If there is an economic downturn or other adverse events which specifically impacts the economy of Java, the Company’s Gross Sales will be disproportionately affected. There can be no assurance that the Company can maintain the current level of growth, Gross Sales and profits similar to those enjoyed historically from stores in Java if it expands in other regions. If the Company is unable to maintain current levels, the Company’s overall growth, Gross Sales and profits may drop significantly, which may adversely affect the Company’s business, cash flows, operational results, financial condition and prospects.

The Company may be unable to obtain certain required licences and registrations for its stores

The Company is subject to a wide variety of regulatory provisions in key areas such as planning laws, tax and trading laws and requires various licences and approvals from the relevant central or local government or the local government authorities to carry out its operations. As discussed in Section 19 – “Regulation”, the Company must obtain SIUP, IUTM, IPUPS and nuisance licences for its stores. The Company must renew all licences and approvals as they expire, as well as obtain new licences and approvals whenever required. The Company has

Page 23 ------4. RISK FACTORS ------experienced difficulties in obtaining certain licences (including SIUP and/or IUTM and/or TDP (Tanda Daftar Perusahaan) with respect to its stores located in Surabaya and Sidoarjo Town Square and IPUPS with respect to one store in Jakarta) due to, among other things, the relevant authorities’ inability to process applications within a time frame as prescribed by laws and regulations and these issues may continue. As a result, the Company may not be able to secure the necessary licences that have not been obtained or to renew any licences that have expired. Fulfilling all the requirements necessary to obtain a licence does not guarantee that a licence will be granted. Administrative or other issues can prevent licences from being granted, as the relevant authority has ultimate discretion over whether or not the licence will be granted. Failure to obtain or renew such licences or comply with the terms and conditions (including with respect to certain restrictions and/or reporting obligations) provided in the relevant licenses (including IUTM and IPUPS) may expose the Company to sanctions including warning letters, suspension or revocation of the Company’s licences, temporary closure of the relevant stores, fines, or other administrative sanctions. The Company’s failure to obtain, maintain or renew the licences or approvals required by the central government or the local government to conduct its operations could reduce the Company’s Gross Sales and profitability and may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company may be liable for additional tax obligations following the conclusion of a pending tax audit

The Company has received a notice, dated 6 February 2013, from The Ministry of Finance of the Republic of Indonesia, Director General of Tax, Director of Inspection and Collection informing the Company that it will be the subject of a tax audit of its compliance with its corporate income tax, withholding income tax and value added tax obligations for fiscal years 2009, 2010 and 2011. The Company is cooperating with the audit process, which is expected to conclude no later than 6 August 2013. Upon completion, if the Ministry of Finance were to conclude that the Company had underpaid with respect to any of its tax obligations, the Company may be assessed additional tax and/or penalties for such non-compliance, which could have a material adverse effect on its financial condition and prospects. The penalties for underpayment of tax are 2% of the underpaid amount per month from the point in time of the underpayment up to the date of payment of the overdue tax, subject to a maximum of 24 months.

There may be changes in Indonesian foreign ownership and other regulations applicable to the Company

The Company is subject to a variety of regulatory laws which restrict and regulate the scope of its operations. See Section 19 – “Regulation” for further details. In compliance with the foreign ownership requirements under Presidential Decree No. 36 of 2010 (“PR 36/2010”) and MOT Regulation 53/2008, all the Company’s stores must have a sales area of greater than 2,000 square metres and breach of this requirement could result in administrative sanctions based on the applicable law. In addition, the Regional Regulation of the Province of Jakarta No. 2 of 2002, regarding Private Markets in the Province of Jakarta, requires private businesses owned by foreign companies to have a capitalisation of more than Rp10 billion (excluding land and buildings). Failure to comply with the above requirements may expose the Company to sanctions including warning letters, limitation on the scope of business of the Company, temporary closure of the business operation of the Company or revocation of the relevant licenses of the Company based on the applicable law.

In addition, the Minister of Trade Regulation No. 68/M-DAG/PER/10/2012 on Franchise for Modern Store Businesses (“MOT Regulation 68/2012”) limits the number of franchised modern stores that a company may own to 150 outlets. This limitation should not currently apply to the Company, since the Company owns its private label trademarks (see Section 14 – “Business – Trademarks”) and the Company does not conduct a franchise business. However, the MOT Regulation 68/2012 is a new regulation, and in the future the Government of Indonesia may have a different view or interpretation of this regulation.

The Government of Indonesia may change the relevant regulations and laws that apply to foreign businesses, retail businesses or department store businesses, for example, by requiring their stores to have an increased minimum size, restricting trading hours, changing taxes or limiting the number of stores they own. Changes in legislation regulating the Company’s activities could limit the Company’s expansion plans, reduce the Company’s Gross Sales and profitability and may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

Page 24 ------4. RISK FACTORS ------

The Company’s success depends upon key management, other personnel and sales staff, and the departure or extended absence of such management, or the inability to attract and retain other personnel or sales staff could have a material adverse effect on the Company’s business

The Company is dependent upon certain key senior management personnel who have extensive experience and knowledge of the retail industry. The loss of certain members of its senior management may result in: (i) a loss of organisational focus; (ii) poor operating execution; and/or (iii) an inability to identify and execute potential strategic initiatives such as expansion of its network of stores. The successful implementation of the Company’s strategy also depends on the availability of skilled management at its head offices, distribution centres and major stores and its ability to continue to attract, motivate and retain other employees (including sales staff). The Company also depends on its sales staff to generate Gross Sales in its stores. There can be no assurance that any of these key personnel will continue to be employed by the Company or that it will be able to attract and retain personnel in the future. The loss of services of key personnel, the failure to attract and retain new personnel or the unforeseen extended absence or departure of key personnel, could significantly delay or prevent the Company from achieving its business goals and maintaining its competitive position. In addition the Company still needs to obtain work permits and related authorisations in connection with the employment of non-Indonesian individuals and a failure to obtain such permits and authorisations could lead to an inability to employ such persons and/or penalties. These factors may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s operations may be adversely affected if relations with its employees were to deteriorate or as a result of competition for suitable employees

The Company could be involved in labour disputes that could lead to strikes, work stoppages or other labour disruptions and result in operational delays. Although the Company has not had any significant labour disputes in the past several years, there have been instances of labour disputes in Indonesia and it cannot guarantee that disputes that may affect the Company will not arise in the future.

Additionally, the Company, which operates in many key primary and secondary cities around Indonesia may face labour competition or wage pressure from geographically proximate employers in the same or similar industries. The cities where the Company primarily operates are also the cities where its competitors operate and are looking to expand their operations. In those cities, the competition for capable and qualified personnel is intense and hence could hamper the Company’s ability to recruit and retain capable staff which could restrict the Company’s expansion plans and may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company’s competitors or other similar retailers in Indonesia may offer more lucrative employee remuneration schemes than the Company and the Company may need to match such compensation and other benefits in order to attract and retain talented and qualified store managers and personnel which may increase costs and decrease profits and could result in a loss of employees or an increase in labour costs. Shortages of skilled labour coupled with an increase in labour cost (the provincial government of Jakarta recently increased the minimum wage of Jakarta from Rp1,529,150 to Rp2,200,000 for 2013, and minimum wage levels may continue to increase) may result in higher costs and/or a higher rate of staff turnover which may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The terms of the Company’s indebtedness may limit its financial flexibility

Covenants contained in the agreements governing the Company’s credit facilities restrict the Company’s ability to, among other things and subject to certain permitted exceptions:

Š enter into any amalgamation, demerger or merger, consolidation or corporate reconstruction;

Š invest in or acquire any shares issued by, or any interest in, any person or make a capital investment in any person;

Š enter into, invest in or acquire any shares, stocks, securities or other interests in any joint venture, or provide security for the obligations of any joint venture;

Page 25 ------4. RISK FACTORS ------

Š create or permit to subsist any security over its assets;

Š dispose of any asset; and

Š be a creditor in respect of any financial indebtedness or guarantee any liability or obligation of any person.

The Company may also be required to repay its credit facilities upon the occurrence of certain events and the Company may not be able to finance such a repayment. Failure to comply with an obligation to repay the credit facilities would result in an event of default, in full or in part which may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

These covenants could limit the Company’s ability to pursue the Company’s growth plans, restrict the Company’s flexibility in planning for, or reacting to, changes in the Company’s business and industry and increase the Company’s vulnerability to adverse economic and industry conditions. The Company may enter into additional financing arrangements in the future, which could further restrict the Company’s financial flexibility.

A change of control, defined as (i) any person or group of persons acting in concert (other than CVC Asia Pacific Limited (or its affiliates) or the funds it advises) gains (A) direct or indirect ownership of 50% or more of the share capital, voting rights or similar rights of ownership, or (B) the power to, directly or indirectly, direct the management and the policies of a person whether through the ownership of share capital, voting rights, by contract or otherwise, of MDS, or (ii) a lender reasonably determines that it is in violation of such lender’s legal lending limit (Batas Maksimum Pemberian Kredit) as a result of its participation in the facility, is a mandatory prepayment event under the Senior Facilities Agreement. A change of control event, if a waiver of the mandatory prepayment event cannot be obtained, may have a material adverse effect on the Company’s business, results of operation, financial condition and prospects.

The Company’s insurance policies may be insufficient or the Company may experience a delay between an insured loss occurring and being compensated by its insurers

The Company maintains different types of insurance policies to cover the Company’s operations. The coverage includes merchandise inventory losses, losses resulting from events such as fire, earthquakes, floods, riots, strikes and acts of terrorism or sabotage, business interruption and public liability. The Company does not carry insurance in respect of certain risks that Management believe are not insured under normal industry practice in Indonesia, or which are uninsurable on commercially acceptable terms, or at all, such as those caused by war and civil disorder. Accordingly, there may be circumstances in which the Company will not be covered or compensated, in part or at all, for specific losses, damages and liabilities. For instance, the Company does not have product liability insurance. In addition, the Company is subject to the risks of losses arising from the misappropriation of cash, inventory or other assets by the Company’s employees or third parties, which losses may not be sufficiently covered by the Company’s insurance policies. Should an uninsured loss or a loss in excess of insured limits occur, the Company could be required to pay compensation and/or lose capital invested in the affected store as well as anticipated future net revenue from that store. The Company would also remain liable for financial obligations and possibly lease obligations related to that store. Material losses in excess of insurance proceeds may arise in the future. If a loss arises that is covered by insurance there may be a time lag between the loss occurring and the insurer making a payment. For example, the Company’s losses due to a fire in 2011 were only partially reimbursed with insurance proceeds in 2012, with the balance expected to be reimbursed with insurance proceeds in 2013. Any risk that is not adequately covered by insurance or any time delay in receiving compensation from insurers may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company may be unable to protect its intellectual property rights and may infringe the intellectual property rights of others

The Company operates a significant number of private label brands. Given the significant number of private label brands and the variations used within each brand, not all of the Company’s trademarks have been registered. Given the significant number of brands, the Company may not be aware of all infringements and/or may decide on grounds of cost and expediency not to prevent all instances of infringement. The Company is in the process of registering certain trade marks after its 20 September 2011 merger with MI. There is no certainty that these

Page 26 ------4. RISK FACTORS ------registrations will be approved. The use of unregistered brands by others or the infringement of registered trademarks may harm the Company’s image and business reputation, and may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company cannot be certain that its activities or the activities of its consignment vendors at its stores do not infringe on the intellectual property rights of others and the Company may fail to detect infringing goods. Hence the Company might not be aware of all infringements or know that the infringement has occurred. Infringement may result in negative publicity and the Company may be compelled to discontinue the sale of the offending goods and/or pay damages or fines. As of the Latest Practicable Date, the Company has not been subject to any claims for the infringement of third party intellectual rights. An infringement of a third party’s intellectual property rights may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

Product liability claims and adverse publicity in respect of defective goods sold in the Company’s stores could have a material adverse effect on the Company’s reputation

The quality of the goods in the Company’s stores is of the utmost importance to its business. The packaging, marketing, distribution and sale of the Company’s goods entail an inherent risk of product liability, product recall, adverse publicity and exposure to product liability claims. The Company does not currently have any product liability insurance and there is no assurance that the Company will be successful in seeking recovery of losses from the relevant supplier or consignment vendor if goods are defective. In addition, in the event that the Company is found to be selling defective goods in its stores, whether or not the Company is found responsible for damage caused by the defective goods, this situation may have a material adverse effect on the Company’s reputation. This could lead to an erosion of consumer confidence in the Company’s goods and a subsequent reduction in Gross Sales. Such an event may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company is dependent on its information technology systems

The Company uses advanced information technology (“IT”) systems in its day-to-day business operations to manage procurement, sales and inventory, for credit card processing, and collecting and performing analyses on consumer preferences information (See Section 14 – “Business – Information Technology”). A material interruption or malfunction to the Company’s IT systems in the future may result in a loss of data and an extended breakdown may interrupt the Company’s daily operations and delay the Company’s response to changes in customer demand (the stores cannot process credit card payments resulting in lost sales), leading to situations of goods shortage or overstocking. In 2011, the Company installed a disaster recovery centre to protect it against any unforeseen breakdown in its existing data centre. Although this disaster system assists in ensuring the continuation of the Company’s key operations in the face of unexpected disruptions, there is no assurance that this disaster system will be adequate to support the Company’s operations in the event of a prolonged breakdown of the Company’s primary system, or that the Company’s back-up system will not be compromised along with the Company’s primary system, all of which may have a material adverse effect on the Company’s business operations. In addition, any security breach which results in a customer’s information being disclosed without authorisation will damage the Company’s reputation. All of the Company’s dedicated hardware for its core software systems are housed in a data centre managed by Visionet, an affiliate of the Company. See Section 16 – “Affiliated Transactions”. Any material interruption or malfunction to the Company’s IT system or disaster recovery system may adversely affect the Company’s business, cash flows, operational results, financial condition and prospects.

A significant portion of the Company’s Gross Sales is transacted in cash and its internal controls in relation to cash management may not be able to address all the risks associated with the handling of cash and cash transactions

A significant portion of the Company’s Gross Sales is transacted in cash. The internal controls in relation to cash management that the Company has put in place may not be able to address all the risks associated with the handling of cash and cash transactions. The Company may therefore be exposed to risks such as loss, theft, misappropriation and forgery of the cash used in its transactions. In the event that such risks materialise, this may have a material adverse effect on the Company’s financial position, business and operational results.

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The Company is engaged in a number of transactions with affiliated parties and the application of OJK conflict of interest rules may cause the Company to forego transactions that are in the Company’s best interests

The Company has entered into a number of transactions on arms’ length terms with its affiliated parties. Full details are contained in Section 16 – “Affiliated Transactions”. These transactions include the leases of 42 of the Company’s 116 stores and the Company’s distribution centre and head office. These transactions may involve conflicts of interest which may be detrimental to the Company.

In addition, some of the Company’s Commissioners and Directors are also officers and directors of the Company’s affiliated parties and, with respect to transactions with the Company’s affiliated parties, may individually or in the aggregate, have conflicts of interest. Relations with these affiliates may deteriorate or the relevant contractual counterparty may cease to be an affiliate of the Company. These factors may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

In order to provide more legal certainty and protection to the shareholders, in particular the independent shareholders, in connection with affiliated party transactions or conflict of interest transactions conducted by an Indonesian public company, in November 2009, OJK issued Rule No. IX.E.1 on Affiliated Party Transactions and Conflict of Interest in Certain Transactions which replaced the previous rule issued in 2008 (“BAPEPAM– LK Rule No. IX.E.1”).

BAPEPAM-LK Rule No. IX.E.1 requires an Indonesian public company to disclose information to the public or to submit a report to OJK of its affiliated party transaction at the latest by the end of the second working day following such a transaction and further stipulates that any conflict of interest transaction conducted by an Indonesian public company would require prior approval of the independent shareholders of the issuer or the said Indonesian public company, unless such affiliated party transaction or conflict of interest transaction meets certain criteria for an exemption stipulated under this rule.

Transactions between the Company and other persons could constitute an affiliated party transaction or conflict of interest transaction under the OJK rule. If such transaction falls under the conflict of interest transaction rules, the approval of holders of a majority of shares owned by the independent shareholders would have to be obtained prior to conducting such transaction. OJK has the power to enforce this rule and the Company’s shareholders may also be entitled to seek enforcement or bring enforcement actions based on this OJK rule.

The requirement to obtain independent shareholder approval could be burdensome to the Company in terms of time and expense and could cause the Company to forego entering into certain transactions which the Company might otherwise consider to be in the Company’s best interest. Moreover, approval of the independent shareholders may not be obtained if sought.

The Company may in future experience exposure to foreign exchange rate risk if it sources goods or incurs other expenditure in any other currency

All of the Company’s net revenue is generated from its retail activities in Indonesia and is denominated in Rupiah. Most of the Company’s leases are also denominated in Rupiah (except for 2% of the Company’s stores that have leases denominated in US dollars). Approximately 90% of the Company’s merchandise is sourced domestically and the remaining 10% is sourced through local import agents who price in Rupiah and accept Rupiah payments from the Company in 2012. Payment for goods sourced from overseas may in the future be denominated in or linked to US dollars or other foreign currencies. The Company may choose to source more goods from overseas and its foreign currency denominated expenses may rise. The Company is not currently hedged against foreign exchange risk and, if required, may not be able to obtain swaps on satisfactory terms or at all. Temporary or permanent depreciation of the Rupiah may impact the Company’s cost base if it sources goods from overseas which may in turn have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects. See also – “Risk Factors – Risk Relating to Indonesia – Changes in the value of the Rupiah may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition, prospects and the Share price” below.

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The Company is subject to increasing competition from online retailers, direct selling and home shopping and the willingness of Indonesian consumers to shop online and at home

Online retailing, direct selling and home shopping in Indonesia is predicted to continue to grow on the back of rapid improvement in telecommunications’ infrastructure (in particular increased internet, television and mobile access), payment and security systems, and increased consumer willingness to shop online as well as via television or mobile phone. According to Euromonitor, online retailing in Indonesia accounted for a 3% share of overall value sales in non-store retailing, and continued its current value growth, with an increase of 45% in 2011. The Company currently does not have an online, television, mobile or home sales platform. The growth of online retailing, direct and home selling and Indonesian consumers’ willingness to shop via such platforms and/ or the Company’s responses to such changes may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

The Company may be subject to litigation and other regulatory proceedings

From time to time the Company may be involved in lawsuits and regulatory actions relating to the Company’s business. At the Latest Practicable Date, the Company is not a party to any material litigation. Due to the inherent uncertainties of litigation and regulatory proceedings, the Company cannot accurately predict the ultimate outcome of any such proceedings. An unfavourable outcome may damage the Company’s reputation and Matahari brand and may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are expensive and would require the Company to devote substantial resources and its executives’ time in defending the Company.

The composition of the Company’s Board of Commissioners currently may not be in full compliance with certain regulatory requirements, which may subject us to sanctions laws

Under IDX listing regulations, the Company is required to have Independent Commissioners constitute at least 30% of the members of the Board of Commissioners. As of the date of this Offering Circular, the Company has only two Independent Commissioners out of a total of seven Commissioners (although Travis Saucer has resigned as a Commissioner and once this resignation is effective the situation will be regularised). See Section 17 – “Corporate Governance”. Thus currently, the Company may not be in compliance with this IDX listing regulation. While there are no specific penalties or sanctions expressly provided for non-compliance with this requirement, and to date, we have not received any warning letter or notice of non-compliance from the IDX, the IDX may generally impose sanctions on the Company in accordance with the applicable laws. Such sanctions may include, among others, a monetary fine, a written warning, or a temporary suspension from trading of the Shares. Such a suspension could have a material adverse effect on the market price of the Shares and may adversely impact the Company’s ability to raise capital in the future.

The Company’s business requires capital investments and may require the Company to seek external financing which may not be available on terms acceptable to the Company or at all

The Company’s operations and growth strategies require capital investments (primarily for refurbishment of existing stores and the establishment of new stores). The Company may also require additional working capital facilities for its day-to-day business operations. The availability of this capital investment depends on the Company’s ability to generate cash flow from operations, borrow funds on satisfactory terms or raise funds in the capital markets. The Company does not currently intend to raise additional money from external sources. If the Company does seek other third party financing in future, its ability to arrange for such financing (on acceptable terms or at all) will depend on numerous factors, including general economic and capital market conditions, interest rates, credit availability from banks or other lenders, investor confidence in the Company and/or the sectors in which it operates, and political and economic conditions in Indonesia. If the Company is unable to raise funds to make its planned capital investments or meet its working capital requirements on satisfactory terms or at all, this may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

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The shareholder equity interests in the Company may be diluted in the future by the issuance of equity interests under an employee incentive scheme

There is currently no employee incentive scheme or option scheme in respect of the Shares or any outstanding options over the Shares. The Company currently has no concrete plans to establish any option scheme or other incentivisation scheme for its employees. If the Company does decide to establish any schemes for the grant of options over the Shares in the future, these will comply with applicable law and the Shareholders will be updated. If the Company does establish a share option scheme the existing Shareholders could suffer dilution if the options are exercised.

The Company’s business may be harmed by power shortages in Indonesia

The Company consumes substantial amounts of electricity for lighting and displays at the Company’s stores. Some cities in which the Company operates have periodically imposed limitations, on a citywide basis, on the usage of electricity. There can be no assurance that the limitations on the usage of electricity will not become more prevalent or restrictive, or that these limitations will not have a material adverse effect on the Company’s ability to operate. The back-up power supply systems installed at most of the Company’s stores may not provide sufficient supply of power during all times of power shortage. In the event of any power blackout for a significant period of time, this may have a material adverse effect on the Company’s business operations and the Company may incur losses of inventory and additional costs as a result.

RISKS RELATING TO INDONESIA

The Company is incorporated in Indonesia and all of the Company’s assets and operations are located in Indonesia. As a result, future political, economic, legal and social conditions in Indonesia, as well as certain actions and policies that the Government of Indonesia may, or may not, take or adopt in addition to events such as earthquakes which affect Indonesia may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

Political and social instability in Indonesia may affect the Company

Since the collapse of President Soeharto’s regime in 1998, Indonesia has undergone significant political and social changes that have highlighted the unpredictable nature of Indonesia’s changing political landscape. In 1999, Indonesia successfully conducted its first free elections for Parliament and the President. As a new democratic country, Indonesia continues to face various socio-political issues and has, from time to time, experienced political instability and social and civil unrest. Such instances of unrest have highlighted the unpredictable nature of Indonesia’s changing political landscape. Indonesia also has many political parties, without any one party winning a clear majority to date. In 2004, Indonesians directly elected the President, Vice- President and representatives to the Indonesian parliament for the first time in its history through proportional voting with an open list of candidates. At the lower levels of government, Indonesians have also started directly electing their respective heads and representatives of local and regional governments. In April 2009, another set of elections were held in Indonesia to elect the president, vice-president and representatives to the Indonesian parliament (including national, regional and local representatives). On 20 October 2009, President Yudhoyono was inaugurated for his second five-year term, which will expire in October 2014. The Indonesian Constitution limits presidential tenure to two five-year terms. As a result, President Yudhoyono will not be eligible to run for president in the 2014 elections. Political campaigns by new candidates in Indonesia may increase political and social uncertainty. Political and social unrest may also occur if the results of elections are disputed or unpopular.

Since 2000, thousands of Indonesians have participated in demonstrations in Jakarta and other Indonesian cities both for and against former President Wahid, former President Megawati, and current President Yudhoyono as well as in response to specific issues, including fuel subsidy reductions, privatisation of state assets, anti- corruption measures, decentralisation and provincial autonomy, potential increases in electricity charges and the American-led military campaigns in Afghanistan and Iraq. Although these demonstrations were generally peaceful, some turned violent.

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In June 2001, demonstrations and strikes affected at least 19 cities after the Government of Indonesia mandated a 30% increase in fuel prices. Similar demonstrations occurred in January 2003, when the Government of Indonesia again tried to increase fuel prices, as well as electricity rates and telephone charges. In both instances, the Government of Indonesia was forced to drop or substantially reduce the proposed increases. In March 2005, the Government of Indonesia implemented a 29% increase in fuel prices. In October 2005, the Government of Indonesia terminated fuel subsidies on premium and regular gasoline and decreased fuel subsidies on diesel which resulted in increases in fuel prices of approximately 87.5%, 104.8% and 185.7% for premium gasoline, regular gasoline and diesel fuel, respectively. In response, several non-violent mass protests were organised in opposition to the increases in domestic fuel prices. In March 2012, thousands of protesters marched peacefully along Jakarta’s main thoroughfare to the presidential palace, to oppose the government’s plans to increase subsidised fuel prices by 33%. Any political instability in Indonesia may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

There have also been clashes between religious and ethnic groups resulting in social and civil unrest in parts of Indonesia. In the provinces of Aceh and Papua (formerly Irian Jaya), there have been clashes between supporters of those separatist movements and the Indonesian military. In Papua, continued activity by separatist rebels has led to violent incidents. In recent years, the Government of Indonesia has made progress in negotiations with these troubled regions with limited success, except in the province of Aceh in which an agreement between the Government of Indonesia and the Aceh separatists was reached and peaceful local elections were held with some former separatists as candidates.

Increases in the cost of essential items or commodity prices in Indonesia may reduce the purchasing power of the Company’s customers

According to Euromonitor, Indonesia’s annual inflation rate, as measured by changes in Indonesia’s consumer price index was 5.1% in 2010, 5.4% in 2011 and forecasted to be 4.4% in 2012. The Government’s official targets for inflation in 2013 and 2014 are approximately 4.5% and 4.5% (source: Bank Indonesia). Any increases in the cost of essential items or rise in commodity prices could reduce the discretionary purchasing power of the Company’s customers and lead to decreased spending on the Company’s goods, which may lower the Company’s Gross Sales. Any falls in commodity prices in the outlying regions of Indonesia may also result in increased unemployment and therefore affect the customers’ purchasing power and the Company’s expansion plans. These may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

Indonesia is located in an earthquake zone and is subject to significant geological risk that could lead to social unrest and economic loss

The Indonesian archipelago is one of the most volcanically active regions in the world. It is located in the convergence zone of three major lithospheric plates and accordingly, it is subject to significant seismic activity that can lead to destructive earthquakes and tsunamis, or tidal waves. On 26 December 2004, an underwater earthquake off the coast of Sumatra released a tsunami that devastated coastal communities in Indonesia, Thailand and Sri Lanka. In Indonesia, more than 220,000 people died or were recorded as missing in the disaster, which caused billions of US dollars in damage. Aftershocks from the December 2004 tsunami have also claimed casualties. In May 2006, a 6.3 magnitude earthquake struck roughly 30 miles southwest of Mount Merapi, killing at least 6,000 people and leaving at least 200,000 people homeless in the Yogyakarta region, and prompted eruption of the volcano. By early May, active lava flows had begun and, once constant, Indonesian authorities raised the alert status to the highest level, ordering the immediate evacuation of all residents on the mountain. In July 2006, a 7.7 magnitude earthquake that struck approximately 220 miles south of Jakarta and the resulting tsunami that followed killed at least 500 people and left at least 35,000 people homeless. There have also been several earthquakes in the Aceh area, most recently in April 2012, when an 8.6 magnitude earthquake struck approximately 434 kilometres (270 miles) southwest of Banda Aceh, the capital of Indonesia’s Aceh province, killing ten people. A second large earthquake, with a magnitude of 8.2, occurred off the west coast of Sumatra about two hours later, without any casualties.

A 7.9 magnitude earthquake struck Bengkulu and West Sumatra on 12 September 2007 resulting in 25 deaths, numerous injuries and the evacuation of at least 115,000 people. In September 2009, two major earthquakes

Page 31 ------4. RISK FACTORS ------struck West Java and West Sumatra, with magnitudes of 7.0 and 7.6 respectively, leading to the death of more than 600 people. On 25 October 2010, a 7.7 magnitude earthquake struck Mentawai Island, just off West Sumatra, and on 26 October 2010, Mount Merapi, located in Java, erupted.

In addition to these geological events, seasonal downpours cause frequent landslides and flash floods in Indonesia, a chain of 17,000 islands where millions live in mountainous areas or near fertile flood plains. Heavy rains in December 2006 resulted in floods that killed more than 100 people and displaced over 400,000 people on the north-western Sumatra island. More flooding in January and February 2007 around the capital, Jakarta, killed at least 30 people and displaced at least 340,000 people from their homes. In July 2007, at least seven people were killed and at least 16,000 people were forced to flee their homes because of floods and landslides caused by torrential rains on the island of Sulawesi. This 2007 flood resulted in more damage, deaths and victims left homeless than prior floods in Jakarta. Flooding and landslides in Central and East Java that occurred between the end of 2007 to early 2008 caused 100 deaths and estimated damage amounting to Rp2 trillion. In August 2012, flash floods and a landslide triggered by torrential rains in eastern Indonesia killed at least eight people and left three others missing in Sirimau village and in the capital of Maluku province, Ambon. Most recently, in January 2013, heavy flooding in Jakarta killed at least fifteen people and resulted in the relocation of about 19,000 people from the worst affected districts to safer areas.

The Government of Indonesia has had to expend significant amounts of resources on emergency aid and resettlement efforts. However, there can be no assurance that such aid will be sufficient to aid all victims, or that it will be delivered to recipients on a timely basis. If the Government of Indonesia is unable to deliver aid to affected communities in a timely fashion, political and social unrest could result. Additionally, recovery and relief efforts may strain the Government of Indonesia’s finances and may affect its ability to meet its obligations on its sovereign debt. Any such failure on the part of the Government of Indonesia, or declaration by it of a moratorium on its sovereign debt, could potentially trigger an event of default under numerous private-sector borrowings, and in time may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

In addition, there can be no assurance that future geological occurrences or other natural disasters will not significantly affect the Indonesian economy. A significant earthquake or other geological disturbance in any of Indonesia’s more populated cities and financial centres could severely disrupt the Indonesian economy and undermine investor confidence, and in time may adversely affect the Company’s business, cash flows, operational results, financial condition and prospects.

Regional autonomy may have a material adverse effect on the Company’s business through imposition of local restrictions, taxes and levies

Indonesia is a large and diverse nation covering a multitude of ethnicities, languages, traditions and customs. During the administration of the former President Soeharto, the central government controlled and exercised decision making authorities on almost all aspects of national and regional administration, including the allocation of revenues generated from extraction of national resources in the various regions. This led to a demand for greater regional autonomy, in particular with respect to the management of local economic and financial resources. In response to the demand for greater regional autonomy, the Indonesian Parliament in 1999 passed Law No. 22 Year 1999 regarding Regional Autonomy (“Law No. 22/1999”) and Law No. 25 Year 1999 regarding Fiscal Balance Between The Central Government and The Regions (“Law No. 25/1999”). Law No. 22/1999 has been revoked and replaced by the provisions of regional autonomy Law No. 32 of 2004 (“Law No. 32/2004”) as amended by Law No. 8 of 2005 regarding the First Amendment of Law No. 32/2004 on Regional Autonomy and Law No. 12 of 2008 regarding the Second Amendment of Law No. 32/2004. Law No. 25/1999 has been revoked and replaced by Law No. 33 of 2004 regarding the Fiscal Balance between the Central and the Regional Governments. Under these regional autonomy laws, regional autonomy was expected to give the regions greater powers and responsibilities over the use of ‘national assets’ and to create a balanced and equitable financial relationship between central and local governments.

However, certain regional governments have put in place various restrictions, taxes and levies which may differ from restrictions, taxes and levies put in place by other regional governments and/or are in addition to

Page 32 ------4. RISK FACTORS ------restrictions, taxes and levies stipulated by the central government. Conflicting or additional restrictions, taxes and levies that may be imposed by the applicable regional authorities may have a material adverse effect on the Company’s business and operations located throughout Indonesia.

Terrorist attacks on the United States and responses of the United States and/or its allies thereto, and terrorist activities in Indonesia and certain destabilising events in Southeast Asia have led to substantial and continuing economic and social volatility, which may have a material adverse effect on the Company’s business

The terrorist attacks on the United States on 11 September 2001, together with the military response by the United States and its allies in Afghanistan and continuing military activities in Iraq, have resulted in substantial and continuing economic volatility and social unrest in Southeast Asia. The terrorist attacks in Southeast Asia, which began with the Bali bombings in 2002, have exacerbated this volatility. Further developments stemming from these events or other similar events could cause further volatility. Any additional significant military or other response by the United States and/or its allies or any further terrorist activities could also have a material adverse effect on international financial markets and the Indonesian economy.

In Indonesia during the last decade, there have been various bombing incidents directed toward the Government of Indonesia and foreign governments and public and commercial buildings frequented by foreigners, including Jakarta’s Soekarno-Hatta International Airport. On 12 October 2002, over 200 people were killed in a bombing at a tourist area in Bali. On 5 August 2003, a bomb exploded at the JW Marriott Hotel in Jakarta, killing at least 13 people and injuring 149 others. On 9 September 2004, a car bomb exploded at the Australian Embassy in Jakarta, killing more than six people. On 28 May 2005, bomb blasts in Central Sulawesi killed at least 21 people and injured at least 60 people. On 1 October 2005, bomb blasts in Bali killed at least 23 people and injured at least 101 others. On 17 July 2009, bombs exploded at the Ritz Carlton Hotel and JW Marriott Hotel in Jakarta, killing at least nine people and injuring at least 40 others. Indonesian, Australian and US government officials have indicated that these bombings may be linked to an international terrorist organisation. Demonstrations have also taken place in Indonesia in response to plans for, and subsequent to, US, British and Australian military action in Iraq. The Indonesian authorities are still investigating these incidents, but have suggested that they may be linked to the activities of certain Islamic militant groups.

There can be no assurance that further terrorist acts will not occur in the future. Following the military involvement of the United States and its allies in Iraq, a number of governments have issued warnings to their citizens of a perceived increase in the possibility of terrorist activities in Indonesia, targeting foreign, particularly the United States, interests. Such terrorist acts could destabilise Indonesia and increase internal divisions within the Government of Indonesia as it considers responses to such instability and unrest, thereby adversely affecting investors’ confidence in Indonesia and the Indonesian economy. Violent acts arising from and leading to instability and unrest have in the past had, and could continue to have, a material adverse effect on investment and confidence in, and the performance of, the Indonesian economy, and in turn the Company’s business. Terrorist acts may also affect retail patterns and reduce consumer spending in Indonesia. This may lead to a reduction in consumer numbers and leisure-related spending at the Company’s retail stores. Any of the events described above, including damage to the Company’s assets, could cause interruption to parts of the Company’s business and have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

Outbreak of an infectious disease or any other serious public health concerns in Asia (including Indonesia) and elsewhere may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects

The outbreak of an infectious disease in Asia (including Indonesia) and elsewhere, together with any resulting restrictions on travel or quarantines imposed, could have a negative impact on the economy, and business activity in Indonesia and thereby have a material adverse effect on the Company’s revenue. Examples are the outbreak in 2003 of Severe Acute Respiratory Syndrome (“SARS”) in Asia and the outbreak in 2004 and 2005 of avian influenza, or “bird flu”, in Asia. There can be no assurance that any precautionary measures taken against infectious diseases would be effective. A future outbreak of an infectious disease or any other serious public health concern in Indonesia could seriously harm the Company’s business. During the last nine years, large parts

Page 33 ------4. RISK FACTORS ------of Asia experienced unprecedented outbreaks of the avian flu. As of 10 August 2012, the World Health Organisation (“WHO”) had confirmed a total of 359 fatalities in a total number of 608 cases reported to the WHO, which only reports Laboratory confirmed cases of avian flu. Of these, the Indonesian Ministry of Health reported to the WHO 159 fatalities in a total number of 190 cases of avian flu in Indonesia. In addition, the WHO announced that human-to-human transmission of avian flu had been confirmed in Sumatra, Indonesia. According to the United Nations Food and Agricultural Organisation, the avian flu virus is entrenched in 31 of Indonesia’s 33 provinces and efforts to contain avian flu are failing in Indonesia, increasing the possibility that the virus may mutate into a deadlier form. No fully effective avian flu vaccines have been developed and an effective vaccine may not be discovered in time to protect against the potential avian flu pandemic.

In April 2009, there was an outbreak of Influenza A virus (“H1N1”) which originated in Mexico but has since spread globally including confirmed reports in Indonesia, Hong Kong, Japan, Malaysia, Singapore, and elsewhere in Asia. In August and September 2009, there were a number of deaths in Indonesia resulting from H1N1. H1N1 is believed to be highly contagious and may not be easily contained.

An outbreak of avian flu, SARS, H1N1 or another contagious disease or the measures taken by the governments of affected countries, including Indonesia, against such potential outbreaks, could seriously interrupt the Company’s operations or the services or operations of the Company’s suppliers and customers, and have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects. The perception that an outbreak of avian flu, SARS, H1N1 or another contagious disease may occur may also have an adverse effect on the economic conditions of countries in Asia, including Indonesia.

Labour activism, unrest and employment legislation may have a material adverse effect on the Company

Laws and regulations which facilitate the forming of labour unions, combined with weak economic conditions, have resulted, and may continue to result, in labour unrest and activism in Indonesia.

In 2000, the Government issued Law No. 21 of 2000 on Labour Unions (the “Labour Union Law”). The Labour Union Law, which took effect in August 2000, permits employees to form unions without employer intervention. In March 2003, the Government enacted Law No.13 of 2003 on Employment (the “Labour Law”) which, among other things, increased the amount of severance, service and compensation payments payable to employees upon termination of employment. Based on this law, companies that have 50 employees or more are required to have a bilateral forum consisting of both employers and employees, and a labour union with more than half of a company’s employees participating as members may represent the employees to negotiate the collective labour agreements with the employers. The law also established more permissive procedures for staging strikes. Under the Labour Law, employees have the right to terminate their employment if there is a change of status, change of ownership or merger or consolidation of their employer and receive severance pay, tenure appreciation pay and other compensation which are calculated based on their basic salary and fixed allowances, as well as their length of employment with such employer.

Following its enactment, several labour unions urged the Indonesian Constitutional Court to declare certain provisions of the Labour Law unconstitutional and order the Government of Indonesia to revoke those provisions. The Indonesian Constitutional Court declared the Labour Law valid except for certain provisions, including those relating to the right of an employer to terminate an employee who committed a serious violation and criminal sanctions against an employee who instigates or participates in an illegal labour strike. As a result, the Company may not be able to rely on certain provisions of the Labour Law.

Labour unrest and activism in Indonesia could disrupt the Company’s operations and could have a material adverse effect on the financial condition of Indonesian companies in general, which in turn could adversely affect prices of Indonesian securities on the IDX and the value of the Indonesian Rupiah relative to other currencies. Such events could have a material adverse effect on the Company’s business, financial condition, results of operations and prospects. In addition, general inflationary pressures or changes in applicable laws and regulations could increase labour costs, which could have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

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The Labour Law provides that the employer is not allowed to pay an employee wage below the minimum wage stipulated annually by the provincial or regional/city government. The minimum wage is set in accordance with the need for a decent standard of living and taking into consideration the productivity and growth of economy, however as there are no specific provisions on how to determine the amount of a minimum wage increase, minimum wage increases can be unpredictable. Recently, the provincial government of Jakarta through the Governor of DKI Jakarta Province Regulation No. 189 of 2012, stipulated that the minimum wage of Jakarta for 2013 is Rp2,200,000 per month, which increased from Rp1,529,150 previously. The Company employs a significant workforce, so minimum wage increases in Indonesia could have a material adverse effect on the Company’s business, cash flows, financial condition and prospects.

Indonesian Financial Accounting Standards (“IFAS”) differ from US GAAP and IFRS

The Company prepares its financial statements in accordance with IFAS, which differ in certain material respects from US GAAP and IFRS. As a result, the Company’s financial statements and reported earnings could be significantly different from those that would be reported under US GAAP or IFRS. This Offering Circular does not contain a reconciliation of the Company’s financial statements to US GAAP or IFRS, and there can be no assurance that such reconciliation would not reveal material differences. See Section 27 – “Summary of Certain Differences between IFAS and IFRS”.

Regional or global economic changes may have a material adverse effect on the Indonesian economy and the Company’s business

The economic crisis that affected Southeast Asia, including Indonesia, from mid 1997 was characterised in Indonesia by, among other effects, currency depreciation, a significant decline in real gross domestic product (“GDP”), high interest rates, social unrest and extraordinary political developments. The economic crisis resulted in the failure of many Indonesian companies to repay their debts when due. These conditions had a material adverse effect on Indonesian businesses, including the Company’s business and financial condition. Indonesia entered a recessionary phase with relatively low levels of growth between 1999 to 2002. According to the International Monetary Fund, Indonesia’s real GDP grew at a CAGR of 5.9% between 2006 and 2011 and is expected to grow at a CAGR of 6.4% between 2011 and 2016.

The increased growth reflects the fact that the Indonesian economy has recovered from the Asian economic crisis and has relied on its strong domestic growth as shelter from the global economic crisis that began in late 2007. The strength of the domestic economy is evidenced by the fact that the growth rate in 2013 is expected to exceed the growth rate in 2012. In 2011 and 2012, the United States and several EU member states experienced credit rating downgrades or had their credit ratings outlook changed to negative and concerns persist regarding the debt burden of certain EU countries, including their ability to meet future financing obligations. The global financial markets have experienced, and may continue to experience, significant turbulence originating from the liquidity shortfalls in the US credit and sub-prime residential mortgage markets since the second half of 2007, which have resulted in the collapse of at least two major investment banks in the United States, caused liquidity problems resulting in bankruptcy for many institutions, and resulted in major government bailout packages for banks and other institutions. The global crisis has also resulted in a shortage in the availability of credit, a reduction in foreign direct investment, the failure of global financial institutions, a drop in the value of global stock markets, a slowdown in global economic growth and a drop in demand of certain commodities. In addition, civil unrest and conflicts, such as those in the Middle East, particularly Syria and natural disasters, such as the earthquake and Tsunami in Japan in 2011 and the hurricane on the east coast of the United States in October 2012, may contribute to a global economic downturn.

As a result of these economic crises, the Government of Indonesia has had to rely on the support of international agencies and governments to prevent sovereign debt defaults. The Government of Indonesia continues to have a large fiscal deficit and a high level of sovereign debt, its foreign currency reserves are modest, the Rupiah continues to be volatile and has poor liquidity, and the banking sector is weak and suffers from high levels of non-performing loans. Government of Indonesia funding requirements to areas affected by natural disasters, as well as increasing oil prices, may increase the Government of Indonesia’s fiscal deficits. While inflation has moderated from 12.6% in 2001 to 3.8% in 2011 according to Bank Indonesia, there can be no assurance that this will continue to be maintained.

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The economic difficulties faced by Indonesia during the Asian economic crisis that began in 1997 resulted in, among other things, significant volatility in interest rates, which had a material adverse impact on the ability of many Indonesian companies to service their existing indebtedness. While the Bank of Indonesia interest rates have ranged between 5.75% and 6.75% between 2010 and 2012, there can be no assurance that this relative stability in economic conditions will continue or that the previous adverse economic conditions in Indonesia and the rest of the Asia Pacific region will not occur in the future. In particular, a loss of investor confidence in the financial systems of emerging and other markets, or other factors, may cause increased volatility in the international and Indonesian financial markets and inhibit or reverse the growth of the global economy and the Indonesian economy.

A continued and significant downturn in the global economy, including the Indonesian economy, could have a material adverse effect on the demand for the Company’s goods and may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects. In addition, the general lack of available credit and lack of confidence in the financial markets associated with any market downturn could have a material adverse effect on the Company’s access to capital as well as the Company’s suppliers’ and customers’ access to capital, which in turn could have a material adverse effect on the Company’s ability to fund the Company’s working capital requirements and capital expenditures.

While at present Indonesian retail markets do not appear to have suffered significantly from the most recent crisis, it is possible that the crisis will have a greater impact in future. There can be no assurance that the current global economic crisis will not continue to deteriorate or that the global economic climate will improve in the short term, or that the crisis will not have a greater impact on Indonesia and the Company’s business. Slowing global economic growth and a drop in demand for consumer goods may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

Changes in the value of the Rupiah may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition, prospects and the Share price

One of the most important immediate causes of the economic crisis that began in Indonesia in mid-1997 was the depreciation and volatility of the value of the Rupiah as measured against other currencies, such as the US dollar. Although the Rupiah has appreciated considerably from its low point of approximately Rp17,000 per US dollar in January 1998, the Rupiah continues to experience significant volatility. This volatility affects the amount in foreign currency received upon conversion of cash dividends or other distributions paid in Rupiah by the Company, the Rupiah proceeds received from any Share sale, the book value of foreign currency assets and liabilities, and the income and expenses and cash flows in the Company’s financial statements.

The Rupiah has generally been freely convertible and transferable (except that Indonesian banks may not transfer Rupiah to accounts held by non-Indonesians at a bank within or outside of Indonesia who lack a bona fide trade or investment purpose). On occasion however, the Bank Indonesia has intervened in the currency exchange markets in furtherance of its policies, either by selling Rupiah or by using its foreign currency reserves to purchase Rupiah. There can be no assurance that Bank Indonesia will not modify their current floating exchange rate policy, that the Rupiah will not further depreciate against the US dollar and other currencies, or that the Government of Indonesia will take additional action to stabilise, maintain or increase the value of the Rupiah, or that any of these actions, if taken, will be successful. The Company does not generate any revenues in US dollars. However, a sustained and significant depreciation of the Indonesian Rupiah against the US dollar may result in increasing inflation in Indonesia that may decrease consumers spending on discretionary goods, which may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects. Conversely, appreciations in the value of the Rupiah may result in the increased competitiveness of the Company’s competitors which may import a greater amount of goods from outside Indonesia.

Modification of the current floating exchange rate policy could result in significantly higher domestic interest rates, liquidity shortages, capital or exchange controls or the withholding of additional financial assistance by multinational lenders. This in turn could result in a recession, increased loan defaults and an increased price of imports. Any of the foregoing consequences may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

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Downgrades of credit ratings of Indonesia and Indonesian companies could adversely affect the Company

In 1997, certain internationally recognised statistical rating organisations, including Moody’s, Standard & Poor’s and Fitch Ratings (“Fitch”), downgraded Indonesia’s sovereign rating and the credit ratings of various credit instruments of the Government of Indonesia and a large number of Indonesian banks and other companies. As of the Latest Practicable Date, Indonesia’s sovereign foreign currency long-term debt is rated “Baa3” by Moody’s, “BB+” by Standard & Poor’s and “F3” by Fitch. Sovereign foreign currency short-term debt is rated “BBB-” by both Fitch and Standard & Poor’s. These ratings reflect an assessment of the Government of Indonesia’s overall financial capacity to pay its obligations and its ability or willingness to meet its financial commitments as they become due.

No assurance can be given that Moody’s, Standard & Poor’s, Fitch or any other statistical rating organisation will not downgrade the credit ratings of Indonesia or Indonesian companies, or that even investment grade instruments will not fall into default. Any such downgrade or default could have an adverse impact on liquidity in the Indonesian financial markets and affect the ability of the Government of Indonesia and Indonesian companies, including the Company, to raise additional financing, the interest rates and other commercial terms at which such additional financing is currently available and may have a material adverse effect on the Company’s business, cash flows, operational results, financial condition and prospects.

It may not be possible for investors to effect service of process or to enforce certain judgments against the Company or the Selling Shareholders

The Company is a limited liability company incorporated under the laws of Indonesia. Most of the Company’s Commissioners, Directors and executive officers reside outside the United States. Investors should assume all of the Company’s assets and a substantial portion of the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon the Company or such persons or to enforce against it or any of them judgments obtained in the US courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state or territory within the United States.

Multipolar, one of the Selling Shareholders, is a limited liability company incorporated under the laws of Indonesia. Most of Multipolar’s commissioners, directors and executive officers, reside outside the United States. Investors should assume all of Multipolar’s assets and the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon Multipolar or such persons or to enforce against it or any of them judgments obtained in the US courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state or territory within the United States.

ACC, one of the Selling Shareholders, is a limited liability company incorporated under the laws of the Cayman Islands. All of ACC’s directors and executive officers reside outside the United States. Most of ACC’s assets and the assets of such persons are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon ACC or such persons or to enforce against it or any of them judgments obtained in the US courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state or territory within the United States.

Judgments of non-Indonesian courts are not enforceable in Indonesian courts, although such judgments could be admissible as non-conclusive evidence in a proceeding on the underlying claim in an Indonesian court. There is doubt as to whether Indonesian courts will enter judgments in original actions brought in Indonesian courts predicated solely upon the civil liability provisions of jurisdictions other than Indonesia. As a result, holders of the Shares may be required to pursue claims against the Company or the Selling Shareholders in Indonesia under Indonesian law.

The claims and remedies available under Indonesian law may not be the same or as extensive as those available in other jurisdictions. The Indonesian courts may not protect the interests of investors in the same manner or to the same extent as would US courts.

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Indonesia’s legal system is a civil law system based on written statutes, and decided legal cases do not constitute binding precedent and are not systematically published. The administration of laws and regulations by courts and government agencies may be subject to considerable discretion. In addition, because relatively few disputes relating to commercial matters and modern financial transactions and instruments are brought before Indonesia’s courts, such courts do not necessarily have the experience of courts in other countries. There is uncertainty as to how long it will take for proceedings in Indonesian courts to be concluded and the outcome of proceedings in Indonesian courts may be more uncertain than that of similar proceedings in other jurisdictions. Accordingly, it may not be possible for investors to obtain swift and equitable enforcement of their legal rights.

In addition, purchasers of the Shares may have more difficulty in protecting their interests against actions by the Company’s commissioners, directors or principal shareholders than they might have as investors in shares in a corporation established under the laws of other jurisdictions.

RISKS RELATING TO AN INVESTMENT IN THE SHARES

After completion of the Offering, ACC and Multipolar will own 37.67% and 20.48%, respectively, of the Shares (assuming the Over-allotment Option is not exercised), their interest in the Company’s business may be different from yours

After completion of the Offering, ACC and Multipolar will own 37.67% and 20.48%, respectively, of the Shares (assuming the Over-allotment Option is not exercised). ACC and Multipolar are party to a Cooperation Agreement which contains provisions with respect to their investment in MDS. See Section 15 – “Corporate and Shareholding Structure – Shareholder Arrangements”. Each of ACC and Multipolar (unless they and/or their representatives are required to abstain from voting at the meeting of the Board of Commissioners, Board of Directors and/or Shareholders, as applicable) could accordingly affect the Company’s management, policies and business and matters requiring the approval of Shareholders. ACC and Multipolar have agreed provisions relating to the exercise of their Shareholder voting rights, including in relation to the composition of the Board of Commissioners and Board of Directors. No assurance can be given that the objectives of ACC and Multipolar will not conflict with the Company’s objectives or the interests of other shareholders. See Section 15 – “Corporate and Shareholding Structure – Shareholder Arrangements”.

Future sales or the prospect of future sales of Shares, including by ACC and Multipolar could have a material adverse effect on the market price of the Shares

After completion of the Offering, ACC will hold 37.67% and Multipolar will hold 20.48% of the Shares in the Company (assuming the Over-allotment Option is not exercised). The Shares held by ACC and Multipolar will be subject to six month contractual restrictions on resale under the Underwriting Agreement (subject to certain exceptions). After these restrictions lapse or if they are waived or breached, the sale of a significant number of the Company’s Shares in the public market after the Offering by the Selling Shareholders or other Shareholders, or the perception that such sales may occur, could have a material adverse effect on the market price of the Company’s Shares. These factors could also affect the Company’s ability to raise equity capital in the future at a price favourable to the Company, or at all.

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Conditions in the Indonesian securities market may affect the price or liquidity of the Shares

After the Offering, approximately 48% of the Company’s total issued and paid up share capital will be owned by the public assuming the Over-allotment Option is not exercised. The Indonesian capital markets are less liquid and have different reporting standards than markets in the United States and many other countries. Also, prices in the Indonesian capital markets are typically more volatile than in such other markets. In the past, IDX has experienced some problems which if they were to continue or recur, could affect the market price and liquidity of the securities of Indonesian companies, including the Shares. These problems have included closures of exchanges, broker defaults and strikes, settlement delays, and the bombing of the IDX building. In addition, the governing bodies of the IDX have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. The levels of regulation and monitoring of the Indonesian securities markets and the activities of investors, brokers and other market participants are not the same as in certain other countries. In addition, the ability to sell and settle trades on the IDX may be subject to delays. In light of the foregoing, a Shareholder may not be able to dispose of its Shares at prices or at times at which such holder would be able to do so in more liquid or less volatile markets or at all.

The Company’s ability to pay dividends in the future will depend upon future earnings, financial condition, cash flows, working capital requirements and capital expenditures and will be paid in Rupiah

The amount of the Company’s future dividend payments, if any, will depend on the Company’s future earnings, financial condition, cash flows, working capital requirements and capital expenditures. The Company may not be able to pay dividends, the Company’s Board of Directors may not recommend and the Shareholders may not approve the payment of dividends. Additionally, the Company may be restricted by the terms of the Company’s future credit financing agreements to make dividend payments. The Company may incur expenses or liabilities that would reduce or eliminate the cash available for distribution of dividends. If the Company does not pay cash dividends on the Shares, Shareholders may not receive any return on investment in the Shares unless they sell the Shares at a price higher than the price at the time of purchase.

Under Indonesian Company Law, the Company may distribute a final dividend to Shareholders only if: (a) it has booked a positive profit balance at the close of its financial year (i.e. all net profit booked at the close of its financial year covers all accumulated losses from previous financial years); and (b) it has set aside part of its positive profit balance for its mandatory reserves until the amount of its mandatory reserves reaches at least 20% of its total issued and paid up capital. As at 31 December 2012, the amount of the Company’s prescribed mandatory reserves was only 1.9% of its total issued and paid up capital. In order for the Company to meet the 20% requirement, it will need to appropriate an additional Rp105.4 billion from its unappropriated retained earnings. As at 31 December 2012, the Company’s unappropriated retained earnings was Rp1,242.6 billion. The Company intends to seek approval at its next annual general meeting of Shareholders (to be held in 2013) to appropriate sufficient retained earnings such that its mandatory reserves are increased to be at least 20% of its total issued and paid up capital. Upon such appropriation, it will be legally permissible for a final dividend to be declared and paid (subject to shareholder approval) in respect of the 2013 financial year and subsequent financial years assuming profits are available. As at the Latest Practicable Date, the Company maintains a negative equity position and does not have the ability to pay interim dividends so long as it remains in a situation of negative equity. See Section 6 – “Dividend Policy”.

Exchange fluctuations may have a material adverse effect on the value of the Shares and any dividend distribution

The Shares are denominated in and will be quoted in Rupiah on the IDX. Dividends (if any) with respect to the Shares will be declared and paid in Rupiah and proceeds from on-market sales of the Shares will be received in Rupiah. If a Shareholder wishes to receive such dividend or proceeds in a currency other than Rupiah it will be required to convert the Rupiah. Fluctuations in the exchange rates between the Rupiah and any selected foreign currency will affect the foreign currency value of the dividends received and any sale proceeds. In addition, foreign exchange rules may be imposed which prevent or restrict the conversion of Rupiah into any foreign currency. Dividends may also be subject to Indonesian withholding tax. See Section 22 – “Taxation”.

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Indonesian law may operate differently from the laws of other jurisdictions with regards to the convening of, and the right of shareholders to attend and vote at, general meetings of shareholders of the Company

The Company is subject to Indonesian law and the applicable listing requirements of the IDX. In particular, the convening and conduct of the Company’s general meetings of shareholders will continue to be governed by Indonesian law. The procedure and notice periods in relation to the convening of general meetings of shareholders of the Company, as well as the ability of shareholders to attend and vote at such general meetings, may be different from those of jurisdictions outside Indonesia. For instance, the shareholders of the Company who would be entitled to attend and vote at general meetings of shareholders of the Company are, by operation of Indonesian law, those shareholders registered in the Company’s register of shareholders on the immediately preceding trading day (the “Record Date”) on which the invitation of general meeting is announced. In addition, investors who may have acquired their shares after the Record Date (and before the day of general meeting of shareholders) would not be entitled to attend and vote at the general meeting. For further details on the procedure for the convening and conduct of general meetings of the Company’s shareholders under Indonesian law, see Section 25 – “Key Features of the Shares”. Accordingly, potential investors should note that they may be subject to procedures and rights with regard to general meetings of shareholders of the Company that are different from those to which they may be accustomed in other jurisdictions.

Indonesian law contains provisions that could discourage a takeover of the Company

Under OJK regulations, if there is any change of control of an Indonesian public company, the new controlling party must carry out a tender offer for the remaining shares (public shares, not including shares of the other controlling shareholders, if any). Under BAPEPAM-LK Regulation No. IX.H.1, Attachment to the Decision of the Chairman of BAPEPAM-LK No. KEP-264/BL/2011, dated 31 May 2011, regarding Takeover of Publicly Listed Companies, a takeover of a public company is defined as an action which directly or indirectly changes the controlling party of that public company. A controlling party of a publicly listed company is defined as a person who:

Š owns more than 50 % of the total issued capital of the publicly listed company; or

Š has direct or indirect ability to determine (by any means possible) the management and/or policy of the publicly listed company.

Further, in order to ensure that the public continues to hold at least 20% of the capital of the public company, the regulations require the new controlling party to divest (refloat) its shareholding to the public within two years after completion of the mandatory tender offer if as a result of the mandatory tender offer, the new controlling party holds more than 80% of the publicly listed company’s total paid up capital. If, as a result of a takeover, the new controlling party has more than 80% of the total paid up capital of a public company, the controlling party must continue to perform the mandatory tender offer, although there is still an obligation to divest some of the shares obtained from the mandatory tender offer. In addition, the publicly listed company must have at least 300 shareholders within two years after completion of the mandatory tender offer.

Although such take-over provisions are intended to protect the interests of shareholders by requiring any acquisitions of the Shares that may involve or threaten a change in control to also be extended to all shareholders on the same terms, these provisions may discourage or prevent such transactions from taking place at all.

Shareholders may be subject to dilution on issues of new Shares or other equity securities by the Company

The Shareholders will experience dilution in their holdings upon issuance of additional Shares in the future. Where funds are raised through the issuance of new Shares or other equity or equity linked securities of the Company other than on a pro-rata basis to existing Shareholders, the percentage ownership of such Shareholders in the Company may be diluted. Moreover, the newly issued securities may have rights, preferences or privileges superior to those of the Shares of the existing shareholders.

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A Shareholders’ right to participate in future rights offerings could be limited, which would cause dilution to their holdings

To the extent that in the future the Company offers the Company’s shareholders rights to purchase or subscribe for shares or otherwise distribute shares to the Company’s shareholders, US holders or holders from other jurisdictions may be unable to exercise such rights for the Shares unless a registration statement under the US Securities Act or similar legislation in other countries is effective with respect to the new shares or an exemption from registration under the US Securities Act or similar legislation in other countries is available.

Whenever the Company makes a rights or similar offering of the Shares, the Company will evaluate the costs and potential liabilities associated with, and the Company’s ability to comply with, US and other countries regulations, for any registration statement and any other factors the Company considers appropriate. However, the Company may choose not to file any registration statement and/or other relevant documents. If the Company does not file a registration statement and no exemption from registration under the US Securities Act is available, then US holders of the Shares would be unable to participate in rights or similar offerings and would suffer dilution of their shareholdings. Similar consequences may apply to shareholders in other jurisdictions. Consequently, shareholders may not be able to maintain their proportional equity interests in the Company. Also, as rights issues in Indonesia generally enable participants to purchase shares at a discount to the recent trading price, shareholders’ inability to participate in such rights offerings could cause material economic harm.

The minority shareholders’ rights of Shareholders may be more limited than in other jurisdictions

The obligations under Indonesian law of majority shareholders, commissioners and directors with respect to minority shareholders may be more limited than those in certain other countries such as the United States or the United Kingdom. Consequently, minority shareholders may not be able to protect their interests under current Indonesian law to the same extent as in certain other countries. Principles of corporate law relating to such matters as the validity of corporate procedures, the fiduciary duties of the Company’s management, directors, commissioners and controlling shareholders, and the rights of the Company’s minority shareholders are governed by Indonesian company law, Indonesian capital markets law, OJK regulations, IDX regulations and the Company’s articles of association. Such principles of law differ from those that would apply if the Company were incorporated in a state in the United States or in another jurisdiction. In particular, concepts relating to the fiduciary duties of management are untested in Indonesian courts. Accordingly, legal rights or remedies of minority shareholders may not be the same, or as extensive, as those available in other jurisdictions or sufficient to protect the interests of minority shareholders. See Section 25 – “Key Features of the Shares.”

There may be less company information available, and corporate governance standards may differ, for public companies listed on Indonesian securities markets as compared with those listed on securities markets in more developed countries

The IDX and OJK have different reporting standards than securities exchanges and regulatory regimes in the United States, the United Kingdom and many other countries. There is a difference between the level of regulation and monitoring of the Indonesian securities markets and the activities of investors, brokers and other participants and that of markets in the United States and other developed economies. OJK, an Indonesian governmental entity, together with the IDX are responsible for improving disclosure and other regulatory standards for the Indonesian securities markets. OJK has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about Indonesian companies than is regularly made available by public companies in other countries. As a result, shareholders may not receive the same amount of information or receive information with the same frequency as you may for companies listed in the United States, the United Kingdom and many other countries.

In addition, corporate governance standards and practices may not be as strict, including with regard to the independence of boards of directors and audit and other committees. Because of this, the directors of Indonesian companies may be more likely to have interests that conflict with the interests of shareholders generally, which may result in them taking actions that are contrary to the interests of the company and/or other shareholders.

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The Company operates in a legal system in which the application of various laws and regulations may be uncertain, and through the purchase of the Shares, Shareholders are exposed to such a legal system and may find it difficult or impossible to pursue claims relating to the Shares

As Indonesia is a developing market, its legal and regulatory regime may be less certain than in more developed markets and may be subject to unforeseen changes. At times, the interpretation or application of laws and regulations may be unclear and the content of applicable laws and regulations may not be immediately available to the public. Under such circumstances, consultation with the relevant authority in Indonesia may be necessary to obtain a better understanding or clarification of applicable laws and regulations.

Indonesia’s legal system is a civil law system based on written statutes; judicial and administrative decisions do not constitute binding precedent and are not systematically published. Indonesia’s commercial and civil laws as well as rules on judicial process were historically based on Dutch law as in effect prior to Indonesia’s independence in 1945, and some of these laws have not been revised to reflect the complexities of modern financial transactions and instruments. Indonesian courts are often unfamiliar with sophisticated commercial or financial transactions, leading in practice to uncertainty in the interpretation and application of Indonesian legal principles. The application of many Indonesian laws depends, in large part, upon subjective criteria such as the good faith of the parties to the transaction and principles of public policy, the practical effect of which, absent a binding precedent system, is difficult or impossible to predict.

Indonesian judges operate in an inquisitorial legal system and have very broad fact-finding powers and a high level of discretion in relation to the manner in which those powers are exercised. As a result, the administration and enforcement of laws and regulations by Indonesian courts and Indonesian governmental agencies may be subject to considerable discretion, uncertainty and inconsistency. Furthermore, corruption in the court system in Indonesia has been widely reported in publicly available sources.

Indonesian legal principles relating to the rights of shareholders, or their practical implementation by Indonesian courts, differ from those that would apply within the United States or the EU. Absent a binding precedent system, the rights of shareholders under Indonesian law might not be as clearly evident as in most United States and EU jurisdictions. In addition, under Indonesian law, companies may have rights and defences to actions filed by shareholders that these companies would not have in jurisdictions such as the United States and EU member states.

RISKS RELATING TO THE OFFERING

The trading price of the Shares has fluctuated and may fluctuate widely in the future

The Offer Price may not be indicative of the price at which the Shares will be traded following completion of the Offering. The trading price of the Shares has fluctuated and may fluctuate widely in the future or trade at prices significantly below the Offer Price in response to various factors, including but not limited to:

Š acquisitions by the Company or its competitors;

Š variations in the Company’s results of operations;

Š announcements made by the Company or the Company’s competitors;

Š government regulations;

Š investors’ and analysts’ perception of the Company and of the investment environment in Asia, including Indonesia;

Š changes in pricing made by the Company or the Company’s competitors;

Š the depth and liquidity of the market for the Shares including the liquidity of the Shares relative to the rest of the market at the time of the Offering;

Š the market capitalisation not being indicative of the valuation of the Company;

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Š announcements by the Company of strategic alliances or joint ventures;

Š changes in general economic, social, political or market conditions in Indonesia and which generally affect the Indonesian retail industry;

Š additions or departures of key personnel;

Š involvement in litigation; and

Š broad stock market price fluctuations.

Facts and statistics from official and industry sources in this Offering Circular relating to the Indonesian economy and the retail industry in Indonesia may not be fully reliable

Facts and statistics in this Offering Circular relating to Indonesia, the Indonesian economy, the retail sector and other related sectors of Indonesia are derived from various official and industry sources including reports and data from Euromonitor, MarkPlus Insight (in a survey commissioned by the Company) and McKinsey Global Institute that the Directors and the Company believe are reliable. The Directors and the Company believe that the sources of such information and statistics are appropriate sources for such information and statistics and have taken reasonable care in extracting and reproducing such information and statistics. The Company has no reason to believe that such information or statistics are false or misleading in any material respect or that any fact has been omitted that would render such information and statistics false or misleading in any material respect. The Company cannot guarantee, however, the quality or reliability of these official and industry sources. The facts and statistics reproduced and extracted from these sources have not been independently verified by the Company, the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners, the Underwriters, the Co-Lead Managers or any of their or the Company’s Commissioners, Directors, affiliates, agents, employees or advisers. The Company therefore makes no representation as to the accuracy of such facts and statistics from these sources, which may not be consistent with other information compiled within or outside Indonesia.

Investors should read the entire Offering Circular and should not place any reliance on any information contained in press articles, other media and/or research analyst reports regarding us, our business, our industry and the Offering.

There has been prior to the publication of this Offering Circular, and there may be subsequent to the date of this Offering Circular but prior to the completion of the Offering, press, media and/or research analyst coverage regarding us, our business, our industry and the Offering. Potential investors should rely solely upon the information contained in this Offering Circular in making their investment decisions regarding the Offer Shares. The Company, the Selling Shareholders, the Joint Global Coordinators and Joint Bookrunners, the Financial Adviser and the Co-Lead Managers do not accept any responsibility for the accuracy or completeness of the information contained in such press articles, other media and/or research analyst reports nor the fairness or appropriateness of any forecasts, views or opinions expressed by the reports or the press, other media and/or research analysts regarding the Offer Shares, the Offering, the Company or the industry. The Company, the Selling Shareholders, the Joint Global Coordinators and Joint Bookrunners, the Financial Adviser and the Co- Lead Managers do not make any representation as to the appropriateness, accuracy, completeness or reliability of any such information, forecasts, views or opinions expressed or any such publications. To the extent that such statements, forecasts, views or opinions are inconsistent or conflict with the information contained in this Offering Circular, they are disclaimed. Accordingly, prospective investors are cautioned to make their investment decisions on the basis of the information contained in this Offering Circular only and should not rely on any other information.

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EXCHANGE RATES

Bank Indonesia is the sole issuer of Rupiah and is responsible for maintaining the stability of the Rupiah. Since 1970, Indonesia has implemented three exchange rate systems: (i) a fixed rate between 1970 and 1978, (ii) a managed floating exchange rate system between 1978 and 1997 and (iii) a free floating exchange rate system since 14 August 1997. Under the second system, Bank Indonesia maintained the stability of the Rupiah through a trading band policy, under which Bank Indonesia would enter the foreign currency market and buy or sell Rupiah, as required, when trading in the Rupiah exceeded bid and offer prices announced by Bank Indonesia on a daily basis. On 14 August 1997, Bank Indonesia terminated the trading band policy and permitted the exchange rate for the Rupiah to float without an announced level at which it would intervene, which resulted in a substantial decrease in the value of the Rupiah relative to the US dollar. Under the current system, the exchange rate of the Rupiah is determined solely by the market, reflecting the interaction of supply and demand in the market. Bank Indonesia may take measures, however, to maintain a stable exchange rate. Fluctuations in the exchange rate between the Rupiah and other currencies will affect the foreign currency equivalent of the Rupiah price of the Shares on the IDX. Such fluctuations will also affect the amount in foreign currency received upon conversion of cash dividends or other distributions paid by the Company in Rupiah, and the Rupiah proceeds received from any sales of, the Shares.

The following table shows the exchange rate of Rupiah to US dollars based on the middle exchange rate at the end of each month during the periods indicated. The Rupiah middle exchange rate is calculated based on Bank Indonesia’s buying and selling rates. Neither the Company, the Selling Shareholders, the Financial Adviser, the Joint Global Coordinators and Joint Bookrunners, the Co-Lead Managers or any of their respective affiliates or representatives make any representations that the US dollar amounts referred to in this Offering Circular could have been or could be converted into Rupiah at the rates indicated below or any other rate or at all.

Exchange Rates Low(1) High(1) Average(1) Period End 2007 ...... 8,672 9,479 9,136 9,419 2008 ...... 9,051 12,400 9,680 10,950 2009 ...... 9,293 12,065 10,398 9,400 2010 ...... 8,888 9,413 9,085 8,991 2011 ...... 8,460 9,185 8,779 9,068 2012 ...... 8,892 9,707 9,380 9,670 2013: January ...... 9,635 9,740 9,687 9,698 February ...... 9,634 9,725 9,687 9,667 March (up till 22 March 2013) ...... 9,678 9,743 9,704 9,743

(1) For full years, the high and low amounts are determined, and the average shown is calculated, based upon the middle exchange rate announced by Bank Indonesia on the last day of each month during the year indicated. For each month, the high and low amounts are determined, and the average shown is calculated, based on the daily middle exchange rate announced by Bank Indonesia during the month indicated. Source: Statistik Ekonomi dan Keuangan Indonesia (Indonesian Financial Statistics) published monthly by Bank Indonesia; Internet website of Bank Indonesia http://www.bi.go.id/web/en/Moneter/Kurs+Bank+Indonesia/Kurs+Transaksi).

The middle exchange rate on 22 March 2013 was Rp9,743 = USD1.00.

The Federal Reserve Bank of New York does not certify for customs purposes a noon buying rate for cable transfers in Rupiah.

EXCHANGE CONTROL

Indonesia has limited foreign exchange controls. The Rupiah has been, and in general is, freely convertible within or from Indonesia. However, to maintain the stability of the Rupiah and to prevent the utilisation of the Rupiah for speculative purposes by non-residents, Bank Indonesia has introduced regulations to restrict the movement of Rupiah from banks within Indonesia to offshore banks, an offshore branch of an Indonesian bank, or any investment denominated in Rupiah with foreign parties and/or Indonesian parties domiciled or permanently residing outside Indonesia (without underlying trade or investment reasons), thereby limiting

Page 44 ------5. EXCHANGE RATES AND EXCHANGE CONTROLS ------offshore trading to existing sources of liquidity. In addition, Bank Indonesia has the authority to request information and data concerning the foreign exchange activities of all persons and legal entities that are domiciled, or who plan to be domiciled, in Indonesia for at least one year.

Bank Indonesia regulations also require companies that have total assets or total annual gross revenues of at least Rp100 billion to report to Bank Indonesia all data concerning their foreign currency activities, if the relevant transaction is not conducted via a domestic bank or domestic non-bank financial institution (for example, insurance companies, securities companies, finance companies, or venture capital companies). However, if the transaction is conducted via a domestic bank and/or domestic non-bank financial institution, the requirement to report to Bank Indonesia is imposed instead on the relevant domestic banks or non-bank financial institutions that carried out the transaction. The transactions that must be reported include the receipt and payment of foreign currency to bank accounts outside of Indonesia. Indonesian law also requires Indonesian companies with offshore payment obligations to provide periodic reports to Bank Indonesia relating to these payments.

Indonesian Law on Currency

On 28 June 2011, the Indonesian House of Representatives (the Indonesian parliament) passed Law No. 7 of 2011 (the “Currency Law”) concerning the use of Rupiah.

Article 21 of the Currency Law requires the use of Rupiah in payment transactions, monetary settlement of obligations and other financial transactions within Indonesia. However, there are a number of exceptions to this rule, including certain transactions related to the state budget, income or grants from or to foreign countries, international trade transactions, bank deposits denominated in foreign currencies or international financing transactions.

Article 23 of the Currency Law prohibits the rejection of Rupiah as a means of payment, or to settle obligations to be settled in Rupiah and/or in other financial transactions within Indonesia unless there is a doubt on the authenticity of the Rupiah. This prohibition does not apply to transactions in which the payment or settlement of obligations in a foreign currency has been agreed in writing.

There is uncertainty regarding the implementation of Article 21 and 23 because Article 23 prohibits settlement in a currency other than Rupiah, while Article 21 provides a number of exceptions to the prohibition of the rejection of Rupiah. To address public concern, on 6 December 2011, the Ministry of Finance through Directorate General of Treasury of the Republic of Indonesia issued a document to the public on the Interpretation of the Currency Law (“MOF Interpretation”). The MOF Interpretation explains that the Currency Law only applies to cash transactions (coins and banknotes) while excluding the payments involving non-physical money transactions (uang giral) (e.g. cheque and letter of credit) and electronic payments. The MOF Interpretation also explains that the transaction as mentioned in Article 23 of the Currency Law can be exempted by a contractual arrangement existing or entered into either before or after the enactment of the Currency Law. However, it should be noted that the MOF Interpretation is not a legislative product and arguably may be subject to challenge. Non- compliance with the Currency Law is a misdemeanor punishable by up to one year of confinement or by a fine of up to Rp200 million and if the non-compliance is committed by a company, the fines will be increased by one- third. The implementing regulation for the Currency Law must be issued within one year of its effective date of 28 June 2011, and no implementing regulation has been issued as of the date of this Offering Circular other than the enactment of Bank Indonesia Regulation No.14/7/PBI/2012 concerning the management of Rupiah currency.

Purchasing of Foreign Currencies against Rupiah through Banks

Pursuant to Bank Indonesia Regulation No. 10/28/PBI/2008 regarding the Purchasing of Foreign Currencies against Rupiah through Banks (“BI Regulation No. 10/28/2008”), as implemented by the Circular Letter of Bank Indonesia No. 10/42/DPD, dated 27 November 2008 as further amended by Circular Letter of Bank Indonesia No. 14/11/DPM dated 21 March 2012 and Circular Letter of Bank Indonesia No. 15/3/DPM dated 28 February 2013 (“BI Circular Letter No. 10/42/DPD”), which regulates the conversion of Indonesian Rupiah into foreign currency or the purchase of foreign currency with Rupiah by a party in an amount exceeding US$100,000 per month, foreign exchange conversions that are equal to or less than US$100,000 per month need to be supported

Page 45 ------5. EXCHANGE RATES AND EXCHANGE CONTROLS ------by a written declaration by the party purchasing the foreign currency. Any foreign exchange conversion that exceeds such maximum limit must be based on an underlying transaction and supported by underlying transaction documents. Further, the maximum amount of such foreign exchange conversion cannot exceed the value of the underlying transaction.

A party who wishes to purchase foreign currency with a value in excess of US$100,000 in a single month will be required to submit certain supporting documents to the selling bank, including among other things, a duly stamped statement confirming that the underlying agreement is valid and that the foreign currency purchased will only be used for the settlement of the payment obligations pursuant to the underlying agreement. For purchases of foreign currency not exceeding US$100,000, the purchaser must declare in a duly stamped letter that its aggregate foreign currency purchases do not exceed the nominal value set out under the underlying documents in the Indonesian banking system.

Page 46 ------6. DIVIDEND POLICY ------

Under Indonesian law and the Articles of Association, the Shareholders must approve the distribution of dividends at a general meeting of Shareholders upon the recommendation of the Board of Directors. Shareholders on the applicable record date will be entitled to receive the full amount of dividends approved, subject to any Indonesian withholding tax. There are no differences in entitlements to dividends between type A Shares, type B Shares and type C Shares. To the extent a decision is made to pay dividends, such dividends will be paid in Rupiah. The dividends received by non-Indonesian shareholders will be subject to 20% withholding tax in Indonesia unless reduced under an applicable Double Taxation Avoidance Agreement (“DTAA”). For further information relating to the Indonesian tax, see Section 22 – “Taxation”.

The requirements for distributing dividends (whether final or interim) are provided under Indonesian Law. No. 40 of 2007 regarding Limited Liability Companies (the “Company Law”).

FINAL DIVIDENDS

Under the Company Law, the Company may distribute a final dividend to Shareholders only if: (a) it has booked a positive profit balance at the close of its financial year (i.e. all net profit booked at the close of its financial year covers all accumulated losses from previous financial years); and (b) it has set aside part of its positive profit balance for its mandatory reserves until the amount of its mandatory reserves reaches at least 20% of its total issued and paid up capital.

Following the merger between MDS and MI in 2011 (see Section 15 – “Corporate and Shareholding Structure”), the Company has been in a situation of negative equity (i.e. its liabilities exceed its assets). As at 31 December 2012, the amount of the Company’s negative equity was Rp1,931.5 billion. However, the Company has booked positive profit balances in its 2011 and 2012 audited financial statements. The Company has been advised by its Indonesian counsel that its negative equity situation does not prohibit it from distributing a final dividend to its Shareholders so long as it has booked a positive profit balance at the close of the relevant financial year and it has set aside part of its positive profit balance for its mandatory reserves until the amount of its mandatory reserves reaches at least 20% of its total issued and paid up capital.

As at 31 December 2012, the amount of the Company’s prescribed mandatory reserves was only 1.9% of its total issued and paid up capital. In order for the Company to meet the 20% requirement, it will need to appropriate an additional Rp105.4 billion from its unappropriated retained earnings. As at 31 December 2012, the Company’s unappropriated retained earnings was Rp1,242.6 billion. The Company intends to seek approval at its next annual general meeting of Shareholders (to be held at the latest in June 2013) to appropriate sufficient retained earnings such that its mandatory reserves are increased to be at least 20% of its total issued and paid up capital. Upon such appropriation, it will be legally permissible for a final dividend to be declared and paid (subject to shareholder approval) in respect of the 2013 financial year and subsequent financial years assuming profits are available. The Company does not intend to declare a dividend in respect of the 2012 financial year.

Any distribution of final dividends will reduce accumulated profits of the Company and prolong its situation of negative equity. In exercising their duty to act in the Company’s best interests, the Board of Directors will need to confirm that in its best judgment, after making due enquiries, the payment of a final dividend will not result in any material adverse effect to the Company’s financial position.

INTERIM DIVIDENDS

Under Article 72 of the Company Law, the Company is allowed to distribute interim dividends prior to the close of its financial year to the extent that: (a) the Articles of Association expressly contain provisions on distribution of interim dividends; (b) the distribution of interim dividends does not result in the net assets of the Company being less than its aggregate paid up capital plus its mandatory reserve; and (c) the distribution of the interim dividend will not cause the Company to breach any covenants with its existing creditor(s) or adversely affect the Company’s business activities. The Articles of Association of the Company provide for and regulate the distribution of interim dividends.

The distribution of an interim dividend must be determined based on a decision of the Board of Directors with approval from the Board of Commissioners. If the Company suffers losses at the end of the relevant financial

Page 47 ------6. DIVIDEND POLICY ------year, the Shareholders are required to return any interim dividend distributed to them to the Company. The Board of Directors and Board of Commissioners will be jointly liable for any losses incurred by the Company if the Shareholders that received the interim dividend are not able to return such amount.

The Company has been advised by its Indonesian counsel that it will not be able to distribute interim dividends so long as it remains in a situation of negative equity, as to do so would be contrary to the requirements of Article 72 of the Company Law as the Company’s net assets are less than the total amount of the Company’s issued and paid up capital plus mandatory reserves. The timeframe within which the negative equity situation may be reversed is dependent upon various factors including in particular the net profits of the Company and the Company’s dividend policy.

DIVIDEND POLICY

Within the constraints of legal and regulatory requirements, the Company intends to establish a dividend rate that will provide its shareholders with a regular income stream, while allowing it to retain a substantial portion of its earnings for reinvestment into its business principally by way of capital expenditure and repayment of indebtedness.

The Company intends to declare a final dividend of between 40% and 50% of net profits in respect of its 2013 financial year, subject to approval at a general meeting of Shareholders based on a recommendation from the Board of Directors. If approved, this dividend will be paid in 2014. The annual general meeting of Shareholders is expected to be held at the latest by June of each year. If this dividend is approved by Shareholders at the AGM, Shareholders who purchased Offer Shares in the Offering and remain Shareholders on the relevant record date will receive this dividend in full. The Company expects the dividends in respect of its 2014 financial year and subsequent years to be in a similar range. The Company does not intend to declare a dividend in respect of the 2012 financial year. Once the Company is able to pay interim dividends (see “Interim Dividends” above), it will consider the merits of doing so.

Notwithstanding the Company’s intentions, there can be no assurance that the Company will pay dividends in respect of any financial year. The decision of the Board of Directors to recommend a dividend payment is subject to a number of factors which include, among others, the Company’s net profits, availability of reserves, contractual restrictions, working capital requirements and capital expenditure requirements for the applicable period and future prospects.

HISTORICAL DIVIDEND PAYMENTS

The Company did not make any dividend payments in 2010 and 2012.

In 2011, based on the net profits achieved in 2010 and a dividend pay-out ratio of 21.6%, the Company paid dividends in the aggregate total amount of Rp135.0 billion at an equivalent of Rp46.25 per Share. Payment of these dividends were made in two stages – on 30 June 2011 and 15 September 2011. On 30 June 2011, the Company paid dividends amounting to Rp94.1 billion at Rp32.25 per Share. On 15 September 2011, the Company paid dividends amounting to Rp40.9 billion at Rp14.00 per Share.

Page 48 ------7. HISTORICAL PRICE RANGE OF SHARES ------

The Shares are listed on the IDX under the symbol “LPPF”.

The table below sets forth, for the periods indicated, the high and low closing prices and the average daily trading volume on the IDX for the Shares. As at the Latest Practicable Date, approximately 1.85% of the Shares are publicly held. The average daily trading volumes and the price of the Shares may have been affected by the relative lack of liquidity in the Shares. The Offer Price of the Shares has been determined following a book building exercise, have not been determined by reference to the market price of the Shares and may not reflect the market price of the Shares after completion of the Offering.

Closing Price on the IDX for the Shares (Rp per share) Average daily Rp per Share High Low trading volume Calendar Period 2010 First Quarter...... 3,000 810 4,056 Second Quarter ...... 2,700 2,450 4,769 Third Quarter ...... 2,650 2,550 1,000 Fourth Quarter ...... 2,550 2,550 500 2011 First Quarter...... 2,700 2,550 1,500 Second Quarter ...... 2,550 2,400 833 Third Quarter ...... 2,750 2,400 2,000 Fourth Quarter ...... 3,000 2,300 1,286 2012 First Quarter...... 2,300 2,300 10,250 Second Quarter ...... 2,500 2,300 3,125 Third Quarter ...... 2,700 2,500 4,167 Fourth Quarter* ...... 2,700 2,500 0 2013 January* ...... 2,700 2,500 0 February ...... 3,375 2,700 3,750

Source: Bloomberg *As there was no trading activity during Q4 2012 and January 2013, the high and low closing price is the same as that in Q3 2012.

The closing price per Share on the IDX on 21 March 2013 was Rp4,200.

There is no public market outside Indonesia for the Shares. The IDX has experienced significant fluctuations in the price of listed securities and there are currently limits on the range of daily price movements. For more information, see Section 4 – “Risk Factors”.

For more information on the Shares, see Section 25 – “Key Features of the Shares”.

Page 49 ------8. CAPITALISATION AND INDEBTEDNESS ------

The table below shows the cash and cash equivalents and capitalisation of the Company as at 31 January 2013 on an actual basis. This information has been extracted from the Company’s unaudited financial information as at 31 January 2013. This table should be read in conjunction with the financial statements and the related notes included elsewhere in this Offering Circular, Section 10 – “Selected Financial and Operating Data”, Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results Of Operations” and the financial statements in the F-pages.

As at 31 January 2013 (Rp billions) (US dollars millions)(2) Cash and cash equivalents(1) 848.2 87.5 Long-term bank loans – portion due within one year ...... 484.3 49.9 Long-term bank loans – portion due over one year ...... 2,478.0 255.5 Total debt ...... 2,962.3 305.4 Share capital ...... 386.8 39.9 Additional paid in capital ...... 195.2 20.1 Difference in value from restructuring transactions among entities under common control ...... (3,767.1) (388.5) Retained earnings – Appropriated...... 11.0 1.1 – Unappropriated ...... 1,273.6 131.4 Total equity ...... (1,900.5) (196.0) Total capitalisation (excluding cash and cash equivalents) .... 1,061.8 109.4

(1) Cash and cash equivalents include restricted cash of Rp39.3 billion. Cash and cash equivalents have not been adjusted for the Rp700.0 billion prepayment of the Company’s indebtedness under its syndicated loan facilities which was made on 4 March 2013 or the draw down of Rp250.0 billion on its revolving credit facility on 5 March 2013. Long-term bank loans – portion due within one year and Long- term bank loans – portion due over one year have also not been adjusted for the effect of the prepayment or the draw down on the revolving credit facility. (2) Solely for the convenience of the reader, the Rupiah amounts have been translated into US dollars using the exchange rate of US$ 1 = Rp9,697 giving effect to rounding, where applicable. The convenience translation is unaudited and should not be construed as a representation that the Rupiah amounts represent, or have been or could be converted into, US dollars at this or any other exchange rate. See Section 5 – “Exchange Rates and Exchange Controls”.

On 4 March 2013, the Company prepaid Rp700.0 billion toward its indebtedness under its syndicated loan facilities, reducing its cash and cash equivalents by Rp700.0 billion. Approximately 17% of the prepayment will reduce “Long-term bank loans – portion due within one year” with the balance reducing “Long term bank loans – portion due over one year”. On 5 March 2013, the Company drew down Rp250.0 billion on its revolving credit facility. Other than as a result of the matters set forth under “Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments”, there has been no material change in the Company’s capitalisation or indebtedness since 28 February 2013.

See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results Of Operations – Senior Facilities Agreement” for information on the Company’s financing arrangements.

Page 50 ------9. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ------

The Company has prepared and presented the following unaudited pro forma combined financial information based on its historical financial statements as at and for the year ended 31 December 2010 to illustrate the effects of the Acquisition and Merger between the Company and MI as described in “Section 15 – Corporate and Shareholding Structure” as if the Acquisition and Merger had occurred on 1 January 2010.

On 1 April 2010, MI acquired 98% of the Company’s shares from MPP and Pacific Asia Holdings Ltd.. Following the Acquisition, a mandatory offer was made by MI in respect of the 2% of the issued share capital of the Company that was held by the public. Upon completion of the mandatory tender offer, MI held 98.15% of the Company’s issued share capital. On 30 September 2011, MI and the Company merged, with the Company as the surviving entity. Under IFAS, although MI and the Company had been merged legally on 30 September 2011, the substance of the Merger is seen as being effective from 1 April 2010, the date of the Acquisition. Since both entities are entities under common control at that date, the Merger has been accounted for using the pooling-of- interest method of accounting as provided for under PSAK No. 38 “Accounting for Restructuring Transactions of Entities Under Common Control”. Accordingly, the historical statement of comprehensive income of the Company for the year ended 31 December 2010 presents twelve months of MI’s results of operations but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations. See Section 27 – “Summary of Certain Differences Between IFAS and IFRS”.

The following unaudited pro forma combined statement of comprehensive income for the year ended 31 December 2010 gives effect to the Acquisition and Merger as if they had been consummated on 1 January 2010. The unaudited pro forma combined statement of comprehensive income for the year ended 31 December 2010 combines the historical statement of comprehensive income of the Company for the year ended 31 December 2010, which includes the combined results of operations of MI for the year ended 31 December 2010 and the results of operations of MDS for the period from 1 April 2010 to 31 December 2010, with the historical statement of comprehensive income of MDS for the period from 1 January 2010 to 31 March 2010. This unaudited pro forma information does not reflect the effects of the Acquisition which generally include the amortisation of intangible assets (including goodwill), depreciation charge and tax provision adjustments due to the changes in tax allocation methods.

The following unaudited pro forma combined financial information has not been prepared or presented in compliance with the published guidelines of Article 11 of Regulation S-X promulgated by the SEC for the preparation and presentation of pro forma financial information. As a result, US investors should not rely on this unaudited pro forma combined financial information.

The unaudited pro forma combined financial information of the Company for the year ended 31 December 2010 is provided for illustrative purposes only and does not purport to present what the actual results of operations would have been had the Acquisition and Merger actually occurred on 1 January 2010, nor does it purport to represent the results of operations for any future period or for any future date.

The unaudited pro forma combined statement of comprehensive income of the Company for the year ended 31 December 2010 has been derived from and should be read together with the historical financial statements of the Company and the related notes thereto, prepared in accordance with IFAS, for the year ended 31 December 2010 included elsewhere in this Offering Circular.

Page 51 ------9. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ------

UNAUDITED PRO FORMA COMBINED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2010 (Expressed in millions of Rupiah, unless otherwise stated)

Pro Forma Pro Forma Historical Adjustments Combined (Note a) (Note b) Revenue ...... – Retail sales ...... 1,901,773 448,117 - 2,349,890 – Consignment sales – net ...... 1,400,227 322,332 - 1,722,559 – Services fee ...... 14,699 3,817 - 18,516 Net revenue...... 3,316,699 774,266 - 4,090,965

Cost of revenue ...... (1,173,423) (295,011) - (1,468,434)

Gross profit ...... 2,143,276 479,255 - 2,622,531 Selling expenses ...... (627,520) (177,941) - (805,461) General and administration expenses ...... (619,544) (198,116) - (817,660) Other gains/(losses) – net ...... (203,296) (686) - (203,982)

Operating profit ...... 692,916 102,512 - 795,428

Finance income ...... 21,227 1,727 - 22,954 Finance cost ...... (436,928) - (121,645) (558,573) Finance expense – net ...... (415,701) 1,727 (121,645) (535,619)

Profit before income tax...... 277,215 104,239 (121,645) 259,809

Income tax expense ...... (214,598) (24,259) - (238,857) Net profit ...... 62,617 79,980 (121,645) 20,952

Other comprehensive income/(loss) Difference in value from restructuring transactions among entities under common control ...... (3,767,126) - - (3,767,126)

Reversal of difference in value from restructuring transactions among entities under common control ...... 210,834 - - 210,834

Comprehensive income/(loss)...... (3,493,675) 79,980 (121,645) (3,535,340)

Basis of Pro Forma Presentation

The Acquisition and Merger of the Company and MI is accounted for using the pooling-of-interest method of accounting as provided for under PSAK No. 38 “Accounting for Restructuring Transactions of Entities Under Common Control”. In applying the pooling-of-interest method under PSAK No. 38, the financial statement items of the restructured entities for the period in which the restructuring transactions occur and for any comparative periods disclosed should be presented as if they had been combined from the beginning of the earliest period presented. Management’s view is that the financial statements at the earliest period presented should only include income and expenses from the date that the acquirer obtains control of the acquired entity, which is the date of the Acquisition. Consequently, the pre-acquisition income and expenses of MDS had been excluded. The historical statement of comprehensive income of the Company for the year ended 31 December 2010 presented twelve months of MI’s results of operations but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations.

The Company has prepared and presented the pro forma combined statement of comprehensive income to facilitate the management’s discussion and analysis of the Company’s results of operations between 2010 and 2011. See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results Of

Page 52 ------9. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ------

Operations – Results of Operations – Results of operations for 2010, 2011 and 2012”. As described above, this pro forma combined statement of comprehensive income does not reflect the effects of the Acquisition which generally include the amortisation of intangible assets (including goodwill), depreciation charge and tax provision adjustments due to changes in tax allocation methods.

The unaudited pro forma statement of comprehensive income for the year ended 31 December 2010 gives effect to the Acquisition and Merger as if they had been consummated on 1 January 2010.

Notes to Pro Forma Adjustments

(a) To record the results of operations of MDS for the period from 1 January 2010 to 31 March 2010.

(b) To record the interest expense for the period from 1 January 2010 to 31 March 2010 arising from the following loans that were obtained in connection with the Acquisition: (1) a loan obtained by MI from PT Matahari Pacific in the amount of Rp1,000.0 billion that had an interest rate of 13% per annum in 2010 and (2) a syndicated loan obtained by MDS from several banks in the amount of Rp3,250.0 billion and with a floating interest rate at SBI + 6% per annum.

Supplementary information

(1) The details of the selling expenses are as follows:

Pro Forma Pro Forma Historical Adjustments Combined Selling expenses Rent ...... (430,746) (130,444) (561,190) Marketing ...... (68,714) (17,842) (86,556) Operational services ...... (72,730) (10,685) (83,415) Credit card ...... (24,602) (6,505) (31,107) Plastic bag ...... (16,098) (4,005) (20,103) Others ...... (14,630) (8,460) (23,090) (627,520) (177,941) (805,461)

(2) The details of the general and administrative expenses are as follows:

Pro Forma Pro Forma Historical Adjustments Combined General and administrative expenses Salaries and allowances...... (340,421) (104,828) (445,249) Utility and telecommunication ...... (121,569) (41,411) (162,980) Depreciation ...... (108,113) (32,831) (140,944) Consultant fees ...... (2,013) (633) (2,646) Business travel ...... (10,539) (3,735) (14,274) Repairs and maintenance ...... (8,138) (3,570) (11,708) Insurance ...... (17,213) (4,980) (22,193) Tax and license ...... (6,080) (285) (6,365) Amortisation ...... (1,169) (179) (1,348) Tools ...... (1,942) (496) (2,438) Others ...... (2,347) (5,168) (7,515) (619,544) (198,116) (817,660)

Page 53 ------9. UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ------

(3) The details of the other gains/losses are as follows:

Pro Forma Pro Forma Historical Adjustments Combined Other gains/(losses) Gain/(loss) on sale of fixed assets ...... 472 (512) (40) Reversal of difference in value from restructuring transactions among entities under common control ...... (210,834) - (210,834) Others ...... 7,066 (174) 6,892 (203,296) (686) (203,982)

(4) The details of selected income/(expenses) items are as follows:

Pro Forma Pro Forma Historical Adjustments Combined Cost of consignment sales ...... (3,092,855) (722,374) (3,815,229) Accrued value of MCC reward points ...... (15,000) (4,455) (19,455) Employee benefits obligation ...... (30,912) - (30,912) Distribution centre cost ...... (7,686) (2,014) (9,700) Distribution centre revenue ...... 14,567 3,817 18,384 Costs related to corporate action ...... (968) - (968) Royalty expense to MPP ...... - (4,491) (4,491) Consultant fee income ...... 132 - 132

Page 54 ------10. SELECTED FINANCIAL INFORMATION AND OPERATING DATA ------

You should read the selected financial information presented below in conjunction with the historical financial statements and the notes to those financial statements included elsewhere in this Offering Circular. You should also read “Important Information – Presentation of Financial Information”, Section 9 – “Unaudited Pro Forma Combined Financial Information”, “Section 11 – “Principal Measures of Financial Performance” and Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

The following selected historical financial information of the Company as at the dates and for each of the periods indicated are derived from the Company’s audited financial statements as at and for the years ended 31 December 2010, 2011 and 2012, included elsewhere in this Offering Circular, which have been audited by KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network), independent public accountants in Indonesia.

The following table also sets forth the Company’s selected unaudited pro forma combined statement of comprehensive income for the year ended 31 December 2010. The selected unaudited pro forma combined statement of comprehensive income has been prepared to give effect to the Acquisition and Merger between the Company and MI and based on the assumptions and adjustments described in the notes to the unaudited pro forma combined statement of comprehensive income. The Company has prepared and presented the unaudited pro forma combined statement of comprehensive income as if the Acquisition and Merger had occurred on 1 January 2010. The unaudited pro forma combined financial information of the Company for the year ended 31 December 2010 is provided for illustrative purposes only and is not necessarily indicative of either future results or the results that might have been recorded if such transactions had been consummated on such date. The following unaudited pro forma combined financial information has not been prepared or presented in compliance with the published guidelines of Article 11 of Regulation S-X promulgated by the SEC for the preparation and presentation of pro forma financial information. As a result, US investors should not rely on this unaudited pro forma combined financial information. See Section 9 “Unaudited Pro Forma Combined Financial Information”.

Page 55 ------10. SELECTED FINANCIAL INFORMATION AND OPERATING DATA ------

SELECTED STATEMENTS OF COMPREHENSIVE INCOME INFORMATION

Years ended 31 December Proforma 2010 2010 2011 2012 (Rp billions) Revenue – Retail sales...... 2,349.9 1,901.8 2,595.4 3,174.8 – Consignment sales – net ...... 1,722.6 1,400.2 2,078.8 2,406.9 – Services fee ...... 18.5 14.7 26.5 35.2 Net revenue ...... 4,091.0 3,316.7 4,700.7 5,616.9 Cost of revenue ...... (1,468.4) (1,173.4) (1,595.2) (1,910.8) Gross profit ...... 2,622.5 2,143.3 3,105.5 3,706.1 Selling expenses ...... (805.5) (627.5) (912.9) (1,049.6) General and administrative expenses ...... (817.7) (619.5) (937.4) (1,082.6) Other gains/(losses) – net ...... (204.0) (203.3) (13.9) 10.4 Operating profit...... 795.5 693.0 1,241.3 1,584.3 Finance income ...... 23.0 21.1 31.1 26.2 Finance cost ...... (558.6) (436.9) (536.8) (451.5) Finance expense – net ...... (535.6) (415.8) (505.7) (425.3) Profit before income tax ...... 259.9 277.2 735.6 1,159.0 Income tax expense ...... (238.9) (214.6) (269.9) (388.1) Net profit ...... 21.0 62.6 465.7 770.9 Other comprehensive income/(loss) Difference in value from restructuring transactions among entities under common control ...... (3,767.1) (3,767.1) - - Reversal of difference in value from restructuring transactions among entities under common control .... 210.8 210.8 - - Comprehensive income/(loss) ...... (3,535.3) (3,493.7) 465.7 770.9

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SELECTED STATEMENTS OF FINANCIAL POSITION INFORMATION As at 31 December 2010 2011 2012 (Rp billions) Assets Current assets Cash and cash equivalents ...... 999.2 919.0 999.9 Trade receivables – third parties ...... 14.1 46.3 57.7 Other receivables – third parties ...... 16.6 20.0 15.9 Inventories ...... 400.8 462.0 519.6 Prepaid taxes – other tax ...... 23.7 45.8 44.7 Prepaid expenses...... – Leases ...... 28.0 49.2 73.7 – Others...... 7.3 5.1 6.4 Rental advances ...... 23.3 11.2 13.7 Other current assets ...... 11.3 8.7 12.7 Total current assets ...... 1,524.3 1,567.3 1,744.3 Non-current assets Restricted cash and cash equivalents...... 36.1 37.1 39.2 Advances for purchase of fixed assets ...... 3.5 16.4 14.7 Deferred tax assets...... 16.0 58.6 53.9 Fixed assets (net of accumulated depreciation) ...... 572.1 622.9 694.0 Long-term lease – third parties ...... 14.5 29.8 270.1 Refundable deposits ...... 66.7 74.5 89.3 Other receivables – related party ...... - - 2.4 Other non-current assets ...... 12.0 15.8 21.9 Total non-current assets ...... 720.9 855.1 1,185.5 Total assets ...... 2,245.2 2,422.4 2,929.8

Liabilities and equity Liabilities Current liabilities Trade payables – third parties ...... 718.5 891.2 1,054.7 Other payables – third parties...... 65.1 57.6 85.4 Taxes payable ...... – Corporate income taxes ...... 138.7 113.8 181.3 – Others...... 27.4 14.0 9.7 Accruals ...... 208.2 253.4 270.8 Deferred income ...... 60.5 93.4 84.4 Long-term bank loans – portion due within one year ...... 233.3 284.9 483.9 Total current liabilities ...... 1,451.7 1,708.3 2,170.2 Non-current liabilities Long-term bank loans – portion due over one year ...... 2,733.8 2,082.5 2,475.2 Accruals ...... 84.4 91.5 - Loan from third party ...... 1,000.0 1,069.7 - Employee benefits obligations...... 140.9 172.8 215.9 Total non-current liabilities ...... 3,959.1 3,416.5 2,691.1 Total liabilities ...... 5,410.8 5,124.8 4,861.3 Equity Share capital ...... 386.8 386.8 386.8 Additional paid in capital ...... 195.2 195.2 195.2 Difference in value from restructuring transactions among entities under common control...... (3,767.1) (3,767.1) (3,767.1) Retained earnings – Appropriated ...... - 6.3 11.0 – Unappropriated ...... 19.5 476.4 1,242.6 Total equity ...... (3,165.6) (2,702.4) (1,931.5) Total liabilities and equity ...... 2,245.2 2,422.4 2,929.8

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SELECTED STATEMENTS OF CASH FLOWS INFORMATION

Years ended 31 December 2010(1) 2011 2012 (Rp billions) Net cash flows provided from operating activities ...... 1,283.7 1,223.7 1,599.8 Net cash flows used in investing activities ...... (7,918.4) (260.5) (512.8) Net cash flows generated from/(used in) financing activities ...... 7,670.0 (1,042.4) (1,004.0) Net increase/(decrease) in cash and cash equivalents ...... 1,035.3 (79.2) 83.0 Cash and cash equivalents at the beginning of the year ...... - 1,035.3 956.1 Total cash and cash equivalents at the end of the year ...... 1,035.3 956.1 1,039.1 Restricted cash and cash equivalents ...... (36.1) (37.1) (39.2) Cash and cash equivalents at 31 December ...... 999.2 919.0 999.9

(1) Representing the cash flows of the Company for April – December 2010.

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This section should be read in conjunction with “Important Information – Presentation of Financial Information”, Section 9 – “Unaudited Pro Forma Combined Financial Information”, Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements in the F-pages.

Most of the principal measures of financial performance described in this section are non-GAAP measures and accordingly are not audited, not included in the Financial Statements and not presented in accordance with IFAS. Each of the principal measures of financial performance is used by Management as a supplemental measure of the Company’s performance. Although the principal measures of financial performance are either contained in or fully reconcilable to line items on the Financial Statements and/or based on internal management reports, they may not be equivalent to similarly named measures used by other companies and should not be considered as measures comparable to income statement items in the Financial Statements. They have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, an analysis of the Company’s financial results presented under IFAS.

As described in “Important Information – Presentation of Financial Information”, due to the accounting treatment under PSAK No. 38 “Accounting for Restructuring Transactions of Entities Under Common Control” for the Acquisition and Merger, the Company’s pre-acquisition income and expenses for the period from 1 January 2010 to 31 March 2010 were excluded from the historical financial statements for the year ended 31 December 2010. Consequently, the historical statements of comprehensive income and cash flows of the Company for 2010 presented twelve months of MI’s results of operations and cash flows but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations and cash flows. Accordingly, the results of operations and information in the Company’s historical financial statements for 2010 are generally not comparable with those for 2011. In order to provide investors with a more meaningful representation of the Company’s results of operations for 2010, the Company has prepared a pro forma combined statement of comprehensive income for 2010 to illustrate the effects of the Acquisition and Merger between the Company and MI as described in Section 15 – “Corporate and Shareholding Structure” as if the Acquisition and Merger had occurred on 1 January 2010 for its pro forma combined statement of comprehensive income. See Section 9 “Unaudited Pro Forma Combined Financial Information”. The 2010 financial information contained in this Offering Circular (unless otherwise indicated) is presented on a pro forma basis.

OVERVIEW OF MDS

MDS is Indonesia’s largest department store operator by retail value sales (as per Euromonitor) with a market share of 31.6% of the department store retail sector in 2011 (source: Euromonitor, November 2012). MDS has increased its Gross Sales from Rp7,907.1 billion in 2010 to Rp9,247.2 billion in 2011 and to Rp10,884.0 billion in 2012, presenting sales growth of 16.9% and 17.7% in 2011 and 2012, respectively. MDS has the most extensive department store networks in Indonesia with 116 stores covering a total store space of approximately 750,000 square metres in over 50 cities across Indonesia as at the Latest Practicable Date. MDS stores typically range from 5,000 to 9,000 square metres in size. With over 2.4 million active members as at 31 December 2012, MDS has one of the largest department store loyalty programmes, the Matahari Club Card or MCC in the country.

The Company’s strategy is to provide its customers with good value, by offering a large selection of fashionable and quality merchandise at affordable prices, housed in an attractive and modern store environment with a focus on customer service. MDS’ target demographic segment is Indonesia’s large and growing middle income consumer segment. Management believe that the Company’s broad selection of products allows MDS to appeal to the tastes of all members of a typical middle income Indonesian family in a single store. As at 31 December 2012, MDS offered more than 90,000 SKUs for its DP Goods, and Management estimate that there are more than 200,000 SKUs of its Consignment Goods. Consignment Goods offered across its stores, across product categories including men’s, women’s and children’s clothing, shoes, homeware, cosmetics and accessories.

The Company tailors its merchandise mix (including its mix between DP Goods and Consignment Goods) for each store in accordance with the store’s local target market and its judgement of appropriate price points for that market. MDS generates revenues from (i) consignment margins earned from sales of Consignment Goods (“CV Sales”) and (ii) and sales of DP Goods (“DP Sales”). In 2012, 70.9% the Company’s Gross Sales was

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CV Sales and 29.1% was DP Sales. Since consignment vendors maintain their own inventory (owning the merchandise until time of sale) and bear all purchasing, payroll, working capital, distribution, warehousing and certain other costs, the effective contribution margins for Consignment Goods and DP Goods for the Company are similar. See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Factors Affecting the Company’s Results of Operations – Merchandise Mix”.

MEASURES OF FINANCIAL PERFORMANCE

The table below sets out certain principal measures of the Company’s financial performance for 2010, 2011 and 2012, which are discussed in this section. This supplemental data includes the following non-GAAP measures, as defined below: Gross Sales, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Expenses, Adjusted EBIT, Adjusted EBIT Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDAR and Adjusted EBITDAR Margin. The non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies, who may use and define these measures differently. Accordingly, you should not compare these non-GAAP measures to those presented by other companies. This table also includes SSSG and Gross Sales per square metre of Retail Space measures as defined below.

The Company has provided this supplemental financial data so investors can be provided with the information that Management use to measure the performance of the business. Management believe that these measures are useful supplements to the financial data presented under IFAS as a measure of the Company’s historical operating performance and its ability to generate cash from operations. This data is adjusted for (i) the effects of recurring costs that Management consider non-operating and (ii) non-recurring costs and charges that impact the Company’s net profit. Recurring costs primarily comprise non-cash employee benefits obligations. Non- recurring costs and charges are attributable to major corporate actions taken by the Company, which include the acquisition of the Company by MI in 2010, the Merger of the Company with MI in 2011 and the refinancing and repayment in 2012 of the Rp1,000.0 billion vendor loan provided by PT Matahari Pacific to MI to partially finance the purchase of the shares of the Company (the “Vendor Loan”).

Adjusted Gross Profit Margin, Adjusted EBIT Margin, Adjusted EBITDA Margin, and Adjusted EBITDAR Margin reflect the Company’s performance as a percentage of its Gross Sales.

Adjusted EBIT ...... 1,042.7 1,319.2 1,638.5 Adjusted EBIT Margin (%) ...... 13.2 14.3 15.1 Adjusted EBITDA ...... 1,184.9 1,478.8 1,818.6 Adjusted EBITDA Margin (%) ...... 15.0 16.0 16.7 Adjusted EBITDAR ...... 1,746.1 2,108.2 2,513.1 Adjusted EBITDAR Margin (%) ...... 22.1 22.8 23.1

SSSG (%) ...... 11.2 13.6 11.1 Gross Sales per square metre of Retail Space (Rp thousands) ...... 13,165 14,461 15,466

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Gross Sales, Adjusted Gross Profit, Adjusted EBIT, Adjusted EBITDA, and Adjusted EBITDAR and Adjusted Operating Expenses are reconciled to the relevant line items in the Financial Statements in the discussion below.

Gross Sales

Gross Sales is the gross transactional value of the sales in the Company’s stores after discounts excluding value added tax (“Gross Sales”). Gross Sales comprise DP Sales, CV Sales and revenue from the MCC loyalty programme and tenant income, adjusted for certain other items as described in the footnotes to the table below.

Reconciliation from net revenue to Gross Sales

The following table sets forth the reconciliation from net revenue, a GAAP measure, to Gross Sales, a non- GAAP measure. Net revenue comprises retail sales, net revenue from the sale of Consignment Goods and services fees. Net revenue is a line item in the Company’s statement of comprehensive income. Net revenue differs from Gross Sales because net revenue (i) comprises only the net revenue from CV Sales instead of the gross transactional value of CV Sales included in Gross Sales; (ii) includes services fees charged to third parties, primarily revenue from the distribution centre, which is not included as part of Gross Sales; and (iii) deducts the accrued value of MCC reward points. For a more detailed description of the components of net revenue and a discussion of net revenue movements, see Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Description of selected line items in the statement of comprehensive income – Net Revenue” and Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Results of operations for 2010 to 2011” and Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Results of operations for 2011 to 2012”.

Years ended 31 December 2010 2011 2012 (Rp billions) Net revenue ...... 3,316.7(1) 4,700.7 5,616.9 Plus/(minus):

Net revenue pro forma adjustment ...... 774.3(2) -- CV cost of sales(3) ...... 3,815.2 4,550.3 5,305.3 Accrued value of MCC reward points(4) ...... 19.4 22.7 (3.0) Distribution centre revenue(5) ...... (18.4) (26.0) (34.7) Consultant fee income(6) ...... (0.1) (0.5) (0.5) Gross Sales ...... 7,907.1 9,247.2 10,884.0

(1) Net revenue for 2010 in this table is taken from the audited historical financial statements of the Company. It represents results of operations for April to December 2010. (2) See “Important Information –Presentation of Financial Information”. The net revenue pro forma adjustment for 2010 in this table is taken from the pro forma combined financial information for 2010. The pro forma adjustments reflect the effects of the Acquisition by MI on 1 April 2010 and the Merger with MI as described in Section 15 “Corporate and Shareholding Structure” as if the Acquisition and Merger had occurred on 1 January 2010, which includes adding back the results of operations (January to March 2010) prior to the Acquisition by MI, which are accounted for as equity in the Company’s audited historical financial statements. See description of the preparation of the pro forma combined financial information for 2010 at Section 9 “Unaudited Pro Forma Combined Financial Information”. (3) Consignment Vendor cost of sales (“CV cost of sales”) is the proportion of Gross Sales that is remitted to the consignment vendor. As disclosed in Note 2 to the financial statements for the years ended 31 December 2010, 2011 and 2012 included elsewhere in this Offering Circular, revenues from consignment sales are recorded at the amount of sales of consigned goods to customers less amounts payable to consignors. (4) The accrued value of MCC reward points is added back to calculate Gross Sales because it is treated as a marketing expense in the Company’s internal management reports. In 2012, the Company updated the rate of redemption used in the calculation of deferred income related to MCC reward points based on actual redemption rates in 2012. This resulted in a credit toward the accrued value of MCC reward points being recorded in 2012. MCC reward points can be converted into vouchers and the value of the vouchers is treated as deferred income on the Company’s statement of financial position until the voucher is redeemed and accounted for according to the Company’s deferred income policy. See Section 12 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates and Judgements – Deferred Income.”

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(5) Distribution centre revenue comprises the service fees paid to the Company, principally by consignment vendors, for the use of the Company’s distribution centre and logistics centre to deliver their products to the Company’s stores. Distribution centre revenue is subtracted from net revenue in the reconciliation to Gross Sales because it does not arise from sales by the Company’s stores. Distribution centre revenue is included as service fees in net revenue. (6) Consultant fee income comprises fees paid by MAC to MDS for the provision of reports on the Indonesian retail sector containing only publicly available data on the overall market and key players in the sector including the Company and its competitors. Consultant fee income is subtracted from net revenue in the reconciliation to Gross Sales because it does not arise from sales by the Company’s stores.

Components of Gross Sales

The following table sets forth the types of sales that comprise Gross Sales, the proportion that each type of sale represents as a percentage of Gross Sales and the increase in DP Sales and CV Sales.

Years ended 31 December 2010 2011 2012 (Rp billions, unless otherwise stated) DP Sales(1) ...... 2,369.3 2,618.1 3,171.9 – As a percentage of Gross Sales ...... 30.0 28.3 29.1 – Increase in DP Sales (%) ...... 7.8 10.5 21.2 CV Sales ...... 5,537.8 6,629.1 7,712.1 – As a percentage of Gross Sales ...... 70.0 71.7 70.9 – Increase in CV Sales (%) ...... 17.3 19.7 16.3

(1) DP Sales differs from retail sales (a line item in the Company’s audited historical financial statements) because retail sales includes small amounts of revenue from the MCC loyalty programme in all three years and tenant income in 2010. These amounts are not material.

Gross Sales by geographical segment

The following table sets forth Gross Sales by geographical segment.

Years ended 31 December 2010 2011 2012 2011 2012 (Rp billions) (% increase)

Java ...... 4,962.2 5,769.4 6,736.5 16.3 16.8 Sumatra ...... 1,220.5 1,516.0 1,772.9 24.2 16.9 Kalimantan, Sulawesi and Maluku ...... 1,304.3 1,498.5 1,835.4 14.9 22.5 Others ...... 420.1 463.3 539.2 10.3 16.4

The following table sets forth Gross Sales for 2007 to 2012, as well as the break down between the contribution of established stores that were open for more than one full calendar year (1 January to 31 December) as at the beginning of the period and are included in the SSSG calculation, and the contribution of newer stores not open for at least one full calendar year (1 January to 31 December) as at the beginning of the period. Gross Sales figures for 2007 to 2009 are from before MDS was a standalone company and were reported by MPP with respect to its department store division.

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Increases in Gross Sales are due primarily to same store sales increases of established stores, with the balance being contributed by growth of newer stores that were not open long enough to be considered as part of SSSG and new stores opened during the year.

Years ended 31 December 2007(1) 2008(1) 2009(1) 2010 2011 2012 (Rp billions, unless otherwise stated) Gross Sales (Rp billions) ...... 4,993.2 5,959.0 6,919.5 7,907.1 9,247.2 10,884.0 – Contribution of established stores(2) ...... 4,616.0 5,691.2 6,109.5 7,460.2 8,668.6 10,070.4 – Contribution of newer stores(3) ...... 377.2 267.8 810.0 446.9 578.6 813.6 Increase in Gross Sales (%) ...... 12.9 19.3 16.1 14.3(1) 16.9 17.7

(1) Gross Sales figures for 2007 to 2009 were reported on by MPP with respect to its department store division. See Section 15 “Corporate and Shareholding Structure”. KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) were not engaged to audit, review or apply any procedures to the financial information for 2007, 2008 and 2009. (2) This represents the contribution of the stores that have been in operation for at least one complete calendar year (1 January to 31 December) at the beginning of the period. These stores are included in the SSSG calculation. (3) This represents the contribution of stores that have not been in operation for at least one complete calendar year (1 January to 31 December) at the beginning of the period. These stores are not included in the SSSG calculation.

Discussion

The increase in Gross Sales from 2007 to 2012 was due to improved productivity in existing stores, and the addition of new company stores, as the Indonesian economy developed and the middle income segment, the Company’s target customer segment, expanded. As its target customer base expanded and associated demand increased, the Company improved its offering by adjusting its merchandise mix to better meet customer expectations. The Company also undertook a refurbishment programme to make its stores more attractive to its target customers. Improvements in merchandise mix and the Company’s refurbishment programme have driven improvements in SSSG as described below. The Company has also expanded by adding new stores, (3, 7, 5, 7, 9 and 13 in 2007, 2008, 2009, 2010, 2011 and 2012, respectively), which accounted for a net decrease of stores in 2007 of 2 (due to the closing of 5 stores) and a net increase of stores of 4, 2, 7, 8 (excluding a store opened to replace a store destroyed by fire) and 13 in 2008, 2009, 2010, 2011 and 2012, respectively. Average transaction size has increased during the period (Rp147 thousand in 2010, Rp165 thousand in 2011 and Rp183 thousand in 2012). These factors have driven the growth in Gross Sales and the other measures of financial performance described below.

Gross Sales increased by Rp1,636.8 billion, or 17.7%, from Rp9,247.2 billion in 2011 to Rp10,884.0 billion in 2012. This increase was due to SSSG of 11.1% and the opening of 13 new stores in 2012. The 11.1% SSSG was supported by positive SSSG performance across all regions and, in particular, by SSSG performance in the Java stores of 11.5%, in the Kalimantan, Sulawesi & Maluku stores of 11.3% and in the Others stores of 13.3%. In 2012, there was an increase in CV Sales of 16.3% and an increase in DP Sales of 21.2%. The percentage of Gross Sales attributable to CV Sales decreased from 71.7% in 2011 to 70.9% in 2012 reflecting increased demand for DP Goods.

Gross Sales increased by Rp1,340.1 billion, or 16.9%, from Rp7,907.1 billion in 2010 to Rp9,247.2 billion in 2011. This increase was due to SSSG of 13.6% in 2011 resulting in a contribution of Rp8,668.6 billion from established stores and the opening of nine new stores, which was offset by the closing of one store due to fire. The SSSG of 13.6% was supported by positive SSSG performance across all regions and, in particular, by SSSG performance in Sumatra stores of 15.1% and in Kalimantan, Sulawesi and Maluku stores of 16.5%. Gross Sales growth reflects growth in both categories within the Company’s merchandise mix. In 2011, there was an increase in CV Sales of 19.7% and an increase in DP Sales of 10.5%. The percentage of Gross Sales attributable to CV Sales increased from 70.0% in 2010 to 71.7% in 2011.

Gross Sales increased by Rp987.6 billion, or 14.3%, from Rp6,919.5 billion in 2009 to Rp7,907.1 billion in 2010. This increase was due to SSSG of 11.2% resulting in a contribution of Rp7,460.2 billion from established stores and the opening of seven new stores. There was an increase in CV Sales of 17.3% and an increase in DP Sales of

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7.8% in 2010. This reflected a focus on improving the Company’s CV offering during this period. The percentage of Gross Sales attributable to CV Sales increased from 68.2% in 2009 to 70.0% in 2010.

Gross Sales increased by Rp960.5 billion or 16.1% from Rp5,959.0 billion in 2008 to Rp6,919.5 billion in 2009 as a result of SSSG of 9.9% resulting in a contribution of Rp6,109.5 billion from established stores, the net addition of two stores following the opening of five new stores which was offset in part by the closing of three stores. There was an increase in CV Sales of 18.7% and an increase in DP Sales of 11.0% in 2009. While Gross Sales increased in 2009, SSSG in 2009 was lower than in other periods due to the impact of the global financial crisis which led to a decrease in consumer spending. The lower SSSG in 2009 was also a function of a particularly high SSSG of 19.1% in 2008 reflecting the success of several initiatives to increase store productivity that were realised in 2008.

Gross Sales increased by Rp965.8 billion or 19.3% from Rp4,993.2 billion in 2007 to Rp5,959.0 billion in 2008 as a result of SSSG of 19.1%, the opening of seven new stores accounting for a net addition of four stores. The strong SSSG of 19.3% in 2008 was driven by growth in average retail prices (accounting for approximately half of SSSG for the year) and the success of several initiatives to increase store productivity.

Adjusted Gross Profit and Adjusted Gross Profit Margin

Adjusted Gross Profit is Gross Sales minus the cost of revenue (which are attributable to DP Sales) and CV Costs of Sales (“Adjusted Gross Profit”). Adjusted Gross Profit Margin is Adjusted Gross Profit divided by Gross Sales (“Adjusted Gross Profit Margin”).

Adjusted Gross Profit from DP Sales is the Adjusted Gross profit attributable to DP Sales (“Adjusted Gross Profit from DP Sales”) and Adjusted Gross Profit Margin from DP Sales is Adjusted Gross Profit from DP Sales divided by retail sales (“Adjusted Gross Profit Margin from DP Sales”).

Adjusted Gross Profit from CV Sales is the Adjusted Gross profit attributable to CV Sales (“Adjusted Gross Profit from CV Sales”) and Adjusted Gross Profit Margin from CV Sales is Adjusted Gross Profit from CV Sales divided by CV Sales (“Adjusted Gross Profit Margin from CV Sales”).

Years ended 31 December 2010 2011 2012 (Rp billions, unless otherwise stated) Adjusted Gross Profit ...... 2,633.2 3,116.2 3,685.3 Adjusted Gross Profit Margin (%) ...... 33.3 33.7 33.9 Adjusted Gross Profit from DP Sales ...... 910.6 1,037.4 1,278.4 Adjusted Gross Profit Margin from DP Sales (%) ...... 38.4 39.6 40.3 Adjusted Gross Profit from CV Sales ...... 1,722.6 2,078.8 2,406.9 Adjusted Gross Profit Margin from CV Sales (%)...... 31.1 31.4 31.2

While Adjusted Gross Profit Margins for DP Sales are higher than for CV Sales, Management believe that, after accounting for directly attributable costs, the effective contribution margins for the two types of sales are similar. See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Factors Affecting the Company’s Results of Operations – Merchandise Mix”.

Reconciliation from gross profit to Adjusted Gross Profit

Adjusted Gross Profit differs from gross profit (a line item on the Company’s statement of comprehensive income) because gross profit includes revenue arising from the MCC loyalty programme, which is not included in Adjusted Gross Profit. Furthermore, Adjusted Gross Profit does not include revenue from the distribution centre and consultant fee income, which is included in gross profit. The differences between Adjusted Gross Profit and gross profit were not material in 2010, 2011 or 2012.

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The following table sets forth the reconciliation from gross profit, a GAAP measure, to Adjusted Gross Profit, a non-GAAP measure.

Years ended 31 December 2010 2011 2012 (Rp billions)

Gross profit ...... 2,143.3(1) 3,105.5 3,706.1 Plus/(minus): Gross profit pro forma adjustment ...... 479.3(2) -- Accrued value of MCC reward points ...... 19.4 22.7 (3.0) Distribution centre revenue ...... (18.4) (26.0) (34.7) Distribution centre cost ...... 9.7 14.3 17.4 Consultant fee income, net of expenses ...... (0.1) (0.3) (0.5) Adjusted Gross Profit ...... 2,633.2 3,116.2 3,685.3

(1) Gross profit for 2010 in this table is taken from the audited historical financial statements of the Company. It represents results of operations for April to December 2010. (2) See “Important Information – Presentation of Financial Information”. The gross profit pro forma adjustment for 2010 in this table is taken from the pro forma combined financial information for 2010. See description of the preparation of the pro forma combined financial information for 2010 at Section 9 “Unaudited Pro Forma Combined Financial Information”.

Discussion

Adjusted Gross Profit increased by Rp569.1 billion, or 18.3%, from Rp3,116.2 billion in 2011 to Rp3,685.3 billion in 2012. This increase was primarily due to an increase in Gross Sales of 17.7% in 2012 and a lower costs of sales as a percentage of net revenue which caused an increase in Adjusted Gross Profit Margin from 33.7% in 2011 to 33.9% in 2012. The increase in Adjusted Gross Profit Margin in 2012 reflected improvements in Adjusted Gross Profit Margin from DP Sales due to continued improvements in the DP merchandising programme whereby key DP items are selected and purchased in large quantities at more favourable prices. Adjusted Gross Profit Margin for DP Sales increased from 39.6% in 2011 to 40.3% in 2012. Adjusted Gross Profit Margin for CV Sales decreased from 31.4% in 2011 to 31.2% in 2012.

Adjusted Gross Profit increased by Rp483.0 billion, or 18.3%, from Rp2,633.2 billion in 2010 to Rp3,116.2 billion in 2011. This increase was primarily due to an increase in Gross Sales of 16.9% in 2011 and a lower costs of sales as a percentage of net revenue which caused an increase in Adjusted Gross Profit Margin from 33.3% in 2010 to 33.7% in 2011. The increase in Adjusted Gross Profit Margin in 2011 reflected the Company’s efforts to control cost of revenue arising from DP Sales and CV costs of sales as well as increases in store productivity. Adjusted Gross Profit Margin for DP Sales increased from 38.4% in 2010 to 39.6% in 2011. Adjusted Gross Profit Margin for CV Sales increased from 31.1% in 2010 to 31.4% in 2011.

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Adjusted Operating Expenses

The table below sets forth the calculation of Adjusted Operating Expenses (“Adjusted Operating Expenses”), a non-GAAP measure. Management use Adjusted Operating Expenses along with Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR to measure the performance of the Company’s operations.

Years ended 31 December 2010 2011 2012 (Rp billions) Selling expenses ...... 627.5(1) 912.9 1,049.6 Selling expenses pro forma adjustment ...... 177.9(2) -- General and administrative expenses ...... 619.5(1) 937.4 1,082.6 General and administrative expenses pro forma adjustment ...... 198.1(2) -- Other (gains)/losses – net ...... 203.3(1) 13.9 (10.4) Other (gains)/losses – net pro forma adjustment ...... 0.7(2) -- Operating expenses ...... 1,827.0(2) 1,864.2 2,121.8 Reversal of difference in valued from restructuring transactions among entities under common control(3) ...... (210.8) - - Employee benefits obligations(4) ...... (30.9) (42.6) (48.8) Costs related to corporate actions(5) ...... (1.0) (25.5) (10.2) Royalty expense to MPP(6) ...... (4.5) - - Other costs ...... - (0.5) (0.6) (Loss)/ gain associated with fire destroying store(7) ...... - (9.3) 5.4 Accrued value of MCC reward points(8) ...... 19.4 22.7 (3.0) Distribution centre revenue(9) ...... (18.4) (26.0) (34.7) Distribution centre cost(10) ...... 9.7 14.3 17.4 Consultant fee income, net of expenses ...... (0.1) (0.3) (0.5) Adjusted Operating Expenses...... 1,590.4 1,797.0 2,046.8 Depreciation(2) ...... (140.9) (157.2) (176.1) Amortisation(2) ...... (1.3) (2.4) (4.0) Adjusted Operating Expenses before depreciation and amortisation... 1,448.2 1,637.4 1,866.7 Rent(11) ...... (561.2) (629.4) (694.5) Adjusted Operating Expenses before depreciation, amortisation and rent ...... 887.0 1,008.0 1,172.2

(1) These 2010 measures are taken from the audited historical financial statements of the Company. They represent results of operations for April to December 2010. (2) See “Important Information – Presentation of Financial Information”. The pro forma adjustments in this table are taken from the pro forma combined financial information for 2010. See description of the preparation of the pro forma combined financial information for 2010 in Section 9 “Unaudited Pro Forma Combined Financial Information”. (3) Adjustment for the accounting treatment for entities under common control. This amount was recorded as part of other gains/(losses)-net. See Note 20 to the financial statements in the F-pages. Management subtract this adjustment to calculate Adjusted Operating Expenses because it does not consider this adjustment to be operating in nature. (4) Employee benefit obligations are made to account for liabilities that accrue in accordance with Indonesian labour law. The accrual of employee benefits obligations is a long term liability on the Company’s statement of financial position that Management consider to be a debt-like item. These adjustments are recurring. Management subtract these provisions to calculate Adjusted Operating Expenses because it considers these non-cash provisions as non-operating in nature. See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates and Judgements – Employee Benefits” and Note 21 to the financial statements in the F-pages for a discussion of these liabilities. (5) Costs related to corporate actions comprise costs attributable to the Acquisition in 2010, the Merger in 2011 and the repayment of the Vendor Loan in 2012. These costs include lawyer fees, consultant fees and share transfer levies. The Management subtract these costs to calculate Adjusted Operating Expenses because it does not consider these expenses to be operating in nature. (6) Royalty expense to MPP comprises payments to the Company’s former parent company for use of the Matahari brand prior to the acquisition in 2010. Management subtract this royalty to calculate Adjusted Operating Expenses because it does not consider this royalty to be operating in nature.

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(7) Expenses associated with the loss of a store due to fire in 2011, which were recorded as other gains/(losses) - net. Management subtract losses due to fire in 2011 and add back the insurance proceeds paid to reimburse those losses in 2012 to calculate Adjusted Operating Expenses because these adjustments are non-recurring. See Note 20 to the financial statements in the F-pages. These expenses were fully insured and partially reimbursed in 2012. The Company expects the balance of the loss to be reimbursed with insurance proceeds in 2013. (8) The accrued value of MCC reward points is added back to calculate Adjusted Operating Expenses because it is treated as a marketing expense in the Company’s internal management reports. In 2012, the Company updated the rate of redemption used in the calculation of deferred income related to MCC reward points based on actual redemption rates in 2012. This resulted in a credit towards the accrued value of MCC reward points being recorded in 2012 which was subtracted in the calculation of Adjusted Operating Expenses. (9) Distribution centre revenue comprises the service fees paid to the Company, principally by consignment vendors, for the use of the Company’s distribution centre and logistics centre to deliver their products to the Company’s stores. Management subtract this revenue from Adjusted Operating Expenses because it treats this revenue as an offset to the operating expenses of the distribution centre. (10) Distribution centre expense comprises the expenses related to the distribution centre. Management add this expense from Adjusted Operating Expenses because the Company does not consider distribution centre revenue or expense as a component in its calculation of Adjusted Gross Profit. (11) Rent includes rent and service charges for the Company’s stores, headquarters and distribution centre.

Adjusted Operating Expenses increased from Rp1,590.4 billion in 2010 to Rp1,797.0 billion in 2011 and to Rp2,046.8 billion in 2012. Adjusted Operating Expenses as a percentage of Gross Sales decreased from 20.1% in 2010 to 19.4% in 2011 and to 18.8% in 2012.

See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of operations for 2010, 2011 and 2012” for a further discussion of expenses.

Reconciliation from net profit to Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR

The following table sets forth the reconciliation from net profit, a GAAP measure, to Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR which are non-GAAP measures.

Years ended 31 December 2010 2011 2012 (Rp billions) Net profit ...... 62.6 465.7 770.9 Plus/(minus) adjustments Net profit pro forma adjustments ...... (41.6)(1) -- Finance expense–net ...... 535.6(1)(2) 505.7 425.3 Income tax expense ...... 238.9(1) 269.9 388.1 Operating profit ...... 795.5(1) 1,241.3 1,584.3 Reversal of difference in value from restructuring transactions among entities under common control(3) ...... 210.8 - - Employee benefits obligations(4) ...... 30.9 42.6 48.8 Costs related to corporate actions(5) ...... 1.0 25.5 10.2 Royalty expense to MPP(6) ...... 4.5 - - Other costs ...... - 0.5 0.6 Loss/(gain) associated with fire destroying store(7) ...... - 9.3 (5.4) Adjusted EBIT ...... 1,042.7 1,319.2 1,638.5 Depreciation ...... 140.9(1) 157.2 176.1 Amortisation ...... 1.3(1) 2.4 4.0 Adjusted EBITDA ...... 1,184.9 1,478.8 1,818.6 Rent(8) ...... 561.2(1) 629.4 694.5 Adjusted EBITDAR ...... 1,746.1 2,108.2 2,513.1

(1) See “Important Information – Presentation of Financial Information”. These measures for 2010 in this table and throughout Section 11, unless otherwise stated, are taken from the pro forma combined financial information for 2010. See description of the preparation of the pro forma combined financial information for 2010 in Section 9 “Unaudited Pro Forma Combined Financial Information”. (2) Includes a finance expense–net adjustment of Rp121.6 billion for the period from January – March 2010 to the pro forma results as if the Acquisition had occurred on 1 January 2010.

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(3) Adjustment for the accounting treatment for entities under common control. This amount was recorded as part of other gains/(losses)-net. See Note 20 in the financial statements in the F-pages. (4) Employee benefit obligation liability provisions are made to account for liabilities that accrue in accordance with Indonesian labour law. The accrual of employee benefits obligations liability provisions is long term liability on the Company’s statement of financial position that Management consider to be a debt-like item. These adjustments are recurring. Management add back these provisions in the calculation of Adjusted EBIT because Management consider these non-cash provisions to as non-operating in nature. See Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates and Judgements – Employee Benefits”. (5) Costs related to corporate actions comprise costs attributable to the Acquisition in 2010, the Merger in 2011 and the repayment of the Vendor Loan in 2012. These costs include lawyer fees, consultant fees and share transfer levies. Management add back these costs to the calculation of Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR because it considers them to be non-operating in nature. (6) Royalty expense to MPP was paid to the Company’s former parent company for use of the Matahari brand prior to the Acquisition in 2010. Management add back this royalty to the calculation of Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR because it considers them to be non-operating in nature. (7) Expenses associated with the loss of a store due to fire in 2011, which were recorded as other gains/(losses) – net. See Note 20 to the financial statements in the F-pages. These expenses were fully insured and partially reimbursed in 2012. The Company expects the balance of the loss to be reimbursed by insurance proceeds in 2013. To calculate Adjusted EBIT, Management add back the loss due to fire in 2011 and subtract the gain due to the receipt of insurance proceeds from the fire in 2012 because Management consider these adjustments to be non-recurring. (8) Rent includes rent and service charges for the Company’s stores, headquarters and distribution centre.

The reconciliation from net profit to Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR includes pro forma adjustments to account for the merger treatment of entities under common control and related to the presentation of the 2010 results on a pro forma full year basis. See Section 9 “Unaudited Pro Forma Combined Information”.

Adjusted EBITDAR and Adjusted EBITDAR Margin

Adjusted EBITDAR is defined as the Company’s net profit before finance expense–net, income tax expenses, depreciation, amortisation and rent and is adjusted by adding back certain non-recurring and recurring expenses to the Company’s net profit as described above.

Adjusted EBITDAR Margin is Adjusted EBITDAR divided by Gross Sales.

Reconciliation from net profit to Adjusted EBITDAR

See – “Reconciliation from net profit to Adjusted EBIT”, “Adjusted EBITDA” and Adjusted EBITDAR” above.

Discussion

Adjusted EBITDAR increased by Rp404.9 billion, or 19.2%, from Rp2,108.2 billion in 2011 to Rp2,513.1 billion in 2012. The increase in Adjusted EBITDAR was driven by an increase in Gross Sales of 17.7% in 2012 and reflected improvements in Adjusted Gross Profit Margin from DP Sales due to continued improvements in the DP merchandising programme whereby key DP items are selected and purchased in large quantities at more favourable prices.

Adjusted EBITDAR margin increased from 22.8% in 2011 to 23.1% in 2012 due to a decrease in Adjusted Operating Expenses before depreciation, amortisation and rent (which are added back to Adjusted EBITDAR) as a percentage of Gross Sales from 10.9% in 2011 to 10.8% in 2012. Adjusted Operating Expenses before depreciation, amortisation and rent increased by Rp164.2 billion, or 16.3% from Rp1,008.0 billion in 2011 to Rp1,172.2 billion in 2012.

Adjusted EBITDAR increased by Rp362.1. billion, or 20.7%, from Rp1,746.1 billion in 2010 to Rp2,108.2 billion in 2011. The increase in Adjusted EBITDAR was driven by an increase in Gross Sales of 16.9% from 2010 to 2011 and cost control that drove improvements in Adjusted Gross Profit Margin from 33.3% in 2010 to 33.7% in 2011.

Adjusted EBITDAR margin increased from 22.1% in 2010 to 22.8% in 2011 as a result of a decrease in Adjusted Operating Expenses before depreciation, amortisation and rent (which are added back to Adjusted EBITDAR) as

Page 68 ------11. PRINCIPAL MEASURES OF FINANCIAL PERFORMANCE ------a percentage of Gross Sales from 11.2% in 2010 to 10.9% in 2011. Adjusted Operating Expenses before depreciation, amortisation and rent increased by Rp121.0 billion, or 13.6% from Rp887.0 billion in 2010 to Rp1,008.0 billion in 2011.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is defined as the Company’s net profit before finance expense–net, income tax expenses, depreciation and amortisation and is adjusted by adding back certain non-recurring and recurring expenses to the Company’s net profit as described above.

Adjusted EBITDA Margin is Adjusted EBITDA divided by Gross Sales.

Reconciliation from net profit to Adjusted EBITDA

See – “Reconciliation from net profit to Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR” above.

Discussion

Adjusted EBITDA increased by Rp339.8 billion, or 23.0%, from Rp1,478.8 billion in 2011 to Rp1,818.6 billion in 2012. This increase was primarily due to the reasons described above and was offset by a 10.3% increase in rent from Rp629.4 billion in 2011 to Rp694.5 billion in 2012 associated with increases in rent of the existing store base and the opening of 13 new stores during 2012. As a percentage of Gross Sales, rent decreased from 6.8% in 2011 to 6.4% in 2012. Adjusted EBITDA margin increased from 16.0% in 2011 to 16.7% in 2012.

Adjusted EBITDA increased by Rp293.9 billion, or 24.8%, from Rp1,184.9 billion in 2010 to Rp1,478.8 billion in 2011. This increase was primarily due to the reasons described above and was offset by a 12.2% increase in rent from Rp561.2 billion in 2010 to Rp629.4 billion in 2011 associated with increases in rent of the existing store base and the opening of nine new stores during 2011. As a percentage of Gross Sales, rent decreased from 7.1% in 2010 to 6.8% in 2011.

Adjusted EBITDA margin increased from 15.0% in 2010 to 16.0% in 2011.

Adjusted EBIT and Adjusted EBIT Margin

Adjusted EBIT is defined as the Company’s net profit before finance expense–net and income tax expenses, and is adjusted by adding back certain non-recurring and recurring expenses to the Company’s net profit as described above.

Adjusted EBIT Margin is Adjusted EBIT divided by Gross Sales.

Reconciliation from net profit to Adjusted EBIT

See – “Reconciliation from net profit to Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDAR” above.

Discussion

Adjusted EBIT increased by Rp319.3 billion, or 24.2%, from Rp1,319.2 billion in 2011 to Rp1,638.5 billion in 2012. This increase was primarily due to the reasons described above and a 12.8% increase in depreciation and amortisation expenses from Rp159.6 billion in 2011 to Rp180.1 billion in 2012 associated with the opening of 13 new stores, the refurbishment of 15 stores and other capital expenditure incurred in 2012. As a percentage of Gross Sales, depreciation and amortisation was 1.7% for 2011 and 2012. Adjusted EBIT margin increased from 14.3% in 2011 to 15.1% in 2012.

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Adjusted EBIT increased by Rp276.5 billion, or 26.5%, from Rp1,042.7 billion in 2010 to Rp1,319.2 billion in 2011. This increase was primarily due to the reasons described above and a 12.2% increase in depreciation and amortisation expenses from Rp142.2 billion in 2010 to Rp159.6 billion in 2011 associated with the opening of a nine new stores, the refurbishment of 13 stores and other capital expenditure incurred in 2011. As a percentage of Gross Sales, depreciation and amortisation decreased from 1.8% in 2010 to 1.7% in 2011. Adjusted EBIT margin increased from 13.2%in 2010 to 14.3% in 2011.

SSSG

SSSG is the change in Gross Sales contribution made by stores that have been in operation for at least one complete calendar year (1 January to 31 December) at the beginning of the period. SSSG is used by Management to measure the growth of the Company’s existing business as opposed to growth due to additional stores.

The following table sets forth SSSG for 2007 to 2012. SSSG figures for 2007 to 2009 and the 2009 contribution baseline figures used to calculate SSSG for 2010 are from before MDS was a standalone company and were reported by MPP with respect to its department store division. The table below also sets forth the number of stores included in the SSSG calculation and the number of newer and new stores excluded from the SSSG calculation.

Years ended 31 December 2007 2008 2009 2010 2011 2012 SSSG (%) ...... 13.6(1) 19.1(1) 9.9(1) 11.2(1) 13.6 11.1 Number of established stores(2) ...... 75 76 76 83 87 93 Number of newer stores(3) ...... 4375710 Number of stores opened during the year(4) ...... 3757913

(1) SSSG figures for 2007 to 2009 and the 2009 contribution baseline figures used to calculate SSSG for 2010 are from before MDS was a standalone company and were reported on by MPP with respect to its department store division. See Section 15 – “Corporate and Shareholding Structure”. KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) were not engaged to audit, review or apply any procedures to the financial information for 2007, 2008 and 2009. (2) Stores that were in operation for at least one complete calendar year at the beginning of the year. (3) Stores that were not in operation for at least one complete calendar year at the beginning of the year, but that did not open during the year. (4) Stores opened during the year.

Discussion

The Company has experienced strong same store sales growth, averaging 13.1% a year, from 2007 to 2012. Growth in same store sales has been driven by the Company’s refurbishment programme, improvements in its mix of products, better response to customer demands, growth in its target middle income segment as well as growth in the disposable income of its target customers.

SSSG has exceeded 10% each year since 2007 except for 2009, when it was 9.9% due to the impact of the global economic crisis. SSSG in 2009 was also impacted by comparison with strong SSSG increases in 2008 following the successful implementation of several initiatives to improve sales productivity.

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The following table sets forth SSSG by geographical segment.

Years ended 31 December 2010(1) 2011 2012 % Java ...... 10.8 12.9 11.5 – Greater Jakarta ...... 10.0 13.3 10.0 – Java, excluding Greater Jakarta ...... 11.6 12.4 13.1 Sumatra ...... 11.4 15.1 8.6 Kalimantan, Sulawesi and Maluku ...... 12.4 16.5 11.3 Others ...... 11.9 10.3 13.3 Total SSSG ...... 11.2 13.6 11.1

(1) The 2009 contribution baseline figures used to calculate SSSG for 2010 were reported on by MPP with respect to its department store division. See Section 15 – “Corporate and Shareholding Structure”.

SSSG performance by region is affected by many factors including local economic conditions and competition on a local and regional level.

In terms of SSSG performance, Management believe its stores have performed well during the period from 2010 to 2012. Management believe consistently good SSSG performance across all regions is a result of rigorous site selection process for store location and the Company’s focus on operating excellence across its store network.

Gross Sales per square metre of Retail Space

Gross Sales per square metre of Retail Space is total Gross Sales for the year divided by the average of the total square metres of Retail Space at the end of each month (“Gross Sales per square metre of Retail Space”). Square metres of retail space is the aggregate square metres of retail space in use at the end of the month and is not adjusted for any space under refurbishment.

Discussion

Gross Sales per square metre of Retail Space has increased an average of 8.7% from 2010 to 2012, reflecting similar trends as the other measures discussed above. The table below sets forth Gross Sales per square metre of Retail Space and the increase in Gross Sales per square metre of Retail Space during the period under review.

Years ended 31 December 2010 2011 2012 Gross Sales per square metre of Retail Space (Rp thousand) ...... 13,165 14,461 15,466 Increase in Gross Sales per square metre of Retail Space (%) ...... 9.5%(1) 9.8% 6.9%

(1) The 2009 figure used to calculate the increase in Gross Sales per square metre of Retail Space for 2010 was reported by MPP with respect to its department store division. KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) were not engaged to audit, review or apply any procedures to the financial information for 2007, 2008 and 2009.

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This section should be read in conjunction with “Important Information – Presentation of Financial Information”, Section 11 – “Principal Measures of Financial Performance”, Section 18 – “Industry”, Section 14 – “Business” and the financial statements in the F-pages. Prospective investors should read the entire document and not just rely on the summary information set out below. The financial information considered in this section is extracted from the Financial Statements set out in the financial statements in the F-pages. The Financial Statements have been prepared in accordance with IFAS.

As described in “Important Information – Presentation of Financial Information”, due to the accounting treatment under PSAK No. 38 “Accounting for Restructuring Transactions of Entities Under Common Control” for the Acquisition and Merger, the pre-acquisition income and expenses of the Company for the period from 1 January 2010 to 31 March 2010 were excluded from the historical financial statements for the year ended 31 December 2010. Consequently, the historical statements of comprehensive income and cash flows of the Company for 2010 presented twelve months of MI’s results of operations and cash flows but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations and cash flows. Accordingly, the results of operations and information in the Company’s financial statements for 2010 are not comparable with those for 2011. In order to provide investors with a more meaningful representation of the Company’s results of operations for 2010, the Company has prepared a pro forma combined statement of comprehensive income for 2010 to illustrate the effects of the Acquisition and Merger between the Company and MI as described in Section 15 – “Corporate and Shareholding Structure” as if the Acquisition and Merger had occurred on 1 January 2010 for its pro forma combined statement of comprehensive income. See Section 9 – “Unaudited Pro Forma Combined Financial Information”. 2010 financial information contained in this Offering Circular (unless otherwise indicated) are presented on a pro forma basis.

The following discussion of the Company’s financial condition and results of operations contains forward- looking statements. The Company’s actual results could differ materially from those that it discusses in these forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this document, particularly under “Important Information – Presentation of Financial Information” and Section 4 – “Risk Factors”. In addition, various industry issues also affect the Company’s results of operations and are described in Section 18 – “Industry”.

OVERVIEW OF MDS

MDS is Indonesia’s largest department store operator by retail value sales with a market share of 31.6% of the department store retail sector in 2011 (source: Euromonitor, November 2012). MDS has the most extensive department store networks in Indonesia with 116 stores covering a total store space of approximately 750,000 square metres in over 50 cities across Indonesia as at the Latest Practicable Date. MDS stores typically range from 5,000 to 9,000 square metres in size. With over 2.4 million active members as at 31 December 2012, MDS has one of the largest department store loyalty programmes, the Matahari Club Card or MCC, in the country.

The Company’s strategy is to provide its customers with good value, by offering a large selection of fashionable and quality merchandise at affordable prices, housed in an attractive and modern store environment with a focus on customer service. MDS’ target demographic segment is Indonesia’s large and growing middle income consumer segment. Management believe that the Company’s broad selection of merchandise allows MDS to appeal to the tastes of all members of a typical middle income Indonesian family in a single store. As at 31 December 2012, MDS offered more than 90,000 SKUs for its DP Goods, and Management estimate that there are more than 200,000 SKUs of Consignment Goods offered across its stores, across product categories including men’s, women’s and children’s clothing, shoes, homeware, cosmetics and accessories.

The Company customises its merchandise mix and the mix between DP Goods and Consignment Goods for each store in accordance with the store’s local target market and its judgement of appropriate price points for that market. MDS generates revenues from (i) consignment margins from CV Sales and (ii) DP Sales. For 2012, 70.9% of the Company’s Gross Sales was CV Sales and 29.1% was DP Sales. Since consignment vendors maintain their own inventory (owning the merchandise until time of sale) and bear all purchasing, payroll, working capital, distribution, warehousing and certain other costs, the effective contribution margins for

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Consignment Goods and DP Goods for the Company are similar. Section 12 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Factors Affecting the Company’s Results of Operations – Merchandise Mix”.

MEASURES OF FINANCIAL PERFORMANCE

The table below sets out certain measures of Company’s financial performance for 2010, 2011 and 2012, namely Gross Sales, SSSG, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted EBIT, Adjusted EBIT Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDAR, Adjusted EBITDAR Margin, and Gross Sales per square metre of Retail Space. These non-GAAP measures presented herein may not be comparable to similarly titled measures presented by other companies, who may use and define these measures differently. Accordingly, you should not compare these non-GAAP measures to those presented by other companies.

Gross Sales and SSSG figures for 2007, 2008 and 2009, as well as figures for increases in Gross Sales, SSSG and Gross Sales per square metre of Retail Space in 2010 based on 2009 figures, have also been provided. These figures represent Gross Sales, SSSG and square metres of retail space for the department store division of MPP and were reported on by MPP. KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) were not engaged to audit, review or apply any procedures to the financial information for 2007, 2008 and 2009.

The Company has provided this supplemental financial data so investors can be provided with the information that Management use to measure the performance of the business. Management believe that these measures are useful supplements to the financial data presented under IFAS as a measure of the Company’s historical operating performance and its ability to generate cash from operations. This data is adjusted for (i) the effects of recurring costs that Management consider non-operating and (ii) non-recurring costs and charges that impact the Company’s net profit. Recurring costs primarily comprise non-cash employee benefits obligations. Non- recurring costs and charges are attributable to major corporate actions taken by the Company, which include the Acquisition of the Company by MI in 2010, the Merger of the Company with MI in 2011 and the refinancing and repayment in 2012 of Vendor Loan.

This supplemental data includes the following measures that are non-GAAP measures including Gross Sales, Adjusted Gross Profit, Adjusted Gross Profit from DP Sales, Adjusted Gross Profit from CV Sales, Adjusted Gross Profit Margin, Adjusted Gross Profit Margin from DP Sales, Adjusted Gross Profit Margin from CV Sales, Adjusted EBIT, Adjusted EBIT Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBITDAR and Adjusted EBITDAR Margin. See Section 11 – “Principal Measures of Financial Performance” for a discussion of the Company’s performance as well as performance based on these measures for the years from 2007 to 2012 as well as a description of each of these measures and a reconciliation, when appropriate, back to the relevant line item in the Financial Statements for figures from 2010 to 2012. Gross Sales and SSSG are included from 2007 to 2012.

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Adjusted EBIT...... 1,042.7 1,319.2 1,638.5 Adjusted EBIT Margin (%) ...... 13.2 14.3 15.1 Adjusted EBITDA ...... 1,184.9 1,478.8 1,818.6 Adjusted EBITDA Margin (%) ...... 15.0 16.0 16.7 Adjusted EBITDAR...... 1,746.1 2,108.2 2,513.1 Adjusted EBITDAR Margin (%) ...... 22.1 22.8 23.1

SSSG (%) ...... 11.2 13.6 11.1 Gross Sales per square metre of Retail Space (Rp thousands)...... 13,165 14,461 15,466

Note: See Section 15 – “Corporate and Shareholding Structure”. The pro forma adjustments reflect the effects of the Acquisition by MI on 1 April 2010 and the Merger with MI as described in Section 15 – “Corporate and Shareholding Structure” as if the Acquisition and Merger had occurred on 1 January 2010, which includes adding back the results of operations (January to March 2010) prior to the Acquisition by MI, which are accounted for as equity in the Company’s audited historical financial statements. See description of the preparation of the pro forma combined financial information for 2010 at Section 9 – “Unaudited Pro Forma Combined Financial Information”.

BASIS OF PREPARATION

The Company’s historical financial statements included elsewhere in this Offering Circular as at and for the years ended 31 December 2010, 2011 and 2012 have been audited by KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) in accordance with the auditing standards established by the Indonesian Institute of Certified Public Accountants.

Effective 30 September 2011, MI and the Company completed their Merger with the Company as the surviving entity and with PT Meadow Indonesia being dissolved. See Section 15 – “Corporate and Shareholder Structure – History of Corporate Structure – Merger between MI and MDS on 30 September 2011.”

As described in Section 15 – “Corporate and Shareholding Structure”, on 1 April 2010, MI (a dormant Indonesia- incorporated company) acquired the Company. MI acquired 98% of the Company’s shares from MPP and Pacific Asia Holdings Ltd. Following the Acquisition, a mandatory offer was made by MI in respect of the 2% of the issued share capital of the Company that was held by the public. Upon completion of the mandatory tender offer, MI held 98.15% of the Company’s issued share capital. On 30 September 2011, MI and the Company merged, with the Company as the surviving entity (the “Merger”). MI was dissolved by law. Under IFAS, although MI and the Company had been merged legally on 30 September 2011, the economic and commercial substance of the Merger is seen as being effective from 1 April 2010, the date of the Acquisition. Since both entities are entities under common control at that date, MI and MDS have been combined using the book value as such assets and liabilities transferred in the restructuring transaction of entities under common control are recognised at book value in the same manner as a business combination that is accounted for using the pooling of interest method as provided for under PSAK No. 38 “Accounting for Restructuring Transactions of Entities under Common Control”. The difference between the transfer price paid when MI acquired the Company and the book value of MI’s net assets as at the acquisition date arising from the restructuring transactions of entities under common control is recorded under the account “Difference in Value from Restructuring Transactions among Entities under Common Control” and is presented as a component of the equity section in the statement of financial position. In applying such method under PSAK No. 38, the financial statement items of the restructured entities for the period in which the restructuring transactions occur and for any comparative periods disclosed should be

Page 74 ------12. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------presented as if MDS and MI had been combined from the date the common control exists. Consequently, the pre- acquisition income and expenses of the Company had been excluded. The historical statement of comprehensive income and cash flows of the Company for 2010 presented twelve months of MI’s results of operations and cash flows but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations and cash flows. See also Section 27 – “Summary of Certain differences between IFAS and IFRS”.

For the illustrative purposes of the comparison between the Company’s financial results for 2010 and 2011, pro forma combined financial information for 2010, which account for the Company’s full year financial results as net revenue (and, with it, consequential adjustments for other income statement items) have been used as described below. For a full description of the basis of preparation of pro forma combined financial information for 2010, see Section 9 – “Unaudited Pro Forma Combined Financial Information”. The unaudited pro forma combined financial information in Section 9 has not been prepared or presented in compliance with the published guidelines of Article 11 of Regulation S-X promulgated by the SEC or any guidelines in Indonesia or elsewhere in the world for the preparation and presentation of pro forma financial information. Potential investors should consult their own professional advisors for an understanding of this information.

The Financial Statements included elsewhere in this offering circular have been prepared and presented in accordance with IFAS, which has been historically referred to as Indonesian GAAP, which differs in certain respects from IFRS. See “Summary of Certain Differences between IFAS and IFRS”.

Unless the context otherwise requires, references to “2007”, “2008”, “2009”, “2010”, “2011”, and “2012” in this section are to the years ended 31 December 2007, 2008, 2009, 2010, 2011 and 2012, respectively.

SIGNIFICANT FACTORS AFFECTING THE COMPANY’S RESULTS OF OPERATIONS

The state of the Indonesian retail market and general economic conditions

The Company operates a retail business that is highly dependent on the state of the Indonesian economy. Demand for products in the Company’s stores depends upon the size and disposable income levels of Indonesia’s middle income segment (the Company’s primary consumer target market segment) which in turn depends primarily upon the state of the Indonesian economy. As the economy grows, more consumers have sufficient disposable income to be able to afford the products in the Company’s stores and existing customers are able to spend more on the products in the Company’s stores, both of which potentially increase the size of the Company’s target consumer market and demand for the products in the Company’s stores. According to Euromonitor, Indonesia’s real GDP growth was 6.2% in 2010 and 6.5% in 2011 and is forecast to grow at 6.3% in 2012 and 6.5% in 2013.

Target customer population

The Company’s target demographic is Indonesia’s large and growing middle income consumer segment (defined by Management as people with a consumption expenditure of between Rp0.7 million – 4.5 million per capita, per month). Management believe that the Company’s broad selection of products allows the Company to appeal to the tastes of all members of a typical middle income Indonesian family in a single store. During the period under review, Indonesia has witnessed a rapid emergence of the middle income segment. According to 2010 data from the Central Bureau of Statistics on Indonesian population segmentation by consumer expenditure per capita per month, Management estimate that the Indonesian middle income population comprised 125 million people in 2010, or 52.4% of Indonesia’s total population. With increasing income levels, the Indonesian middle income segment is set to grow further as people from the large lower-income segment of approximately 106 million people (defined by Management as people with a consumption expenditure of below Rp0.7 million per capita, per month) transition into the middle-income group. As people move into the middle income segment and their disposable income increases, they are expected to aspire to purchase more branded products at affordable prices, which Management believe increases demand for the Company’s products.

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Consumer expenditure for the total Indonesian population is expected to grow at a CAGR of 5.3% between 2011 and 2016 according to Euromonitor. Increased demand for consumer goods has supported the growth of the Company’s improvements in same store sales and its expansion programme with the addition of 29 new stores from 2010 to 2012.

Productivity

The Company’s financial results are dependent on the productivity of its stores, which is measured by reference to SSSG and Gross Sales per square metre of Retail Space. SSSG is the change in Gross Sales contribution made by stores that have been in operation for at least one complete calendar year (from 1 January to 31 December) and primarily measures the growth of the Company’s existing business as opposed to growth due to new store expansion. Gross Sales per square metre of Retail Space is the Company’s total Gross Sales for the year divided by the average of the total square metres of Retail Space at the end of each month (“Gross Sales per square metre of Retail Space”). Square metres of retail space is the aggregate square metres of retail space in use at the end of the month and is not adjusted for any space under refurbishment.

See Section 11 – “Principal Measures of Financial Performance” for further details about these measures. The Company has experienced strong SSSG, averaging 13.1% a year, from 2007 to 2012. Based on current operating conditions and outlook, Management expect that future SSSG will continue in line with historic performance over the near to medium term. The Company’s SSSG has been driven by its refurbishment programme, improvements in its mix of products and growth in the size and disposable income of the Company’s primary target market segment. Due to similar factors, Gross Sales per square metre of Retail Space has increased by 17.5% from Rp13,165 thousand in 2010 to Rp15,466 thousand in 2012.

Years ended 31 December 2007 2008 2009 2010 2011 2012 SSSG (%) ...... 13.6(1) 19.1(1) 9.9(1) 11.2(1) 13.6 11.1 Gross Sales per square metre of Retail Space (Rp thousands) (2) ...... 9,619 11,463 12,058 13,165 14,461 15,466

(1) 2007, 2008 and 2009 figures and the 2009 contribution baseline figures used to calculate SSSG for 2010 were reported on by MPP with respect to its department store division. See Section 15 – “Corporate and Shareholding Structure”. KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) were not engaged to audit, review or apply any procedures to the financial information for 2007, 2008 and 2009. (2) Calculated as the Company’s total Gross Sales for the year divided by the average of the total square metres of Retail Space at the end of each month.

Store productivity is affected by the state of the Indonesian economy and competition. In addition, store productivity depends on effective marketing, merchandise and price point mix, the attractiveness of the Company’s merchandise and the overall attractiveness and operation of a store. Any adverse publicity may cause a decline in Gross Sales.

The top five best performing stores contributed 12.9% to Gross Sales and 17.8% to Adjusted EBITDA in 2012 while the bottom five stores (of stores in operation for at least one full calendar year) contributed 1.1% to Gross Sales and 0.3% to Adjusted EBITDA in 2012 on a comparable store basis.

The attractiveness of the Company’s merchandise (both Consignment Goods and DP Goods) impacts the volume of potential customers in the stores, the number of transactions, the average spend per transaction, Gross Sales and, accordingly, the stores’ productivity. Whilst the Company does not have day to day control over the merchandise mix supplied by a consignment vendor or the prices at which the Consignment Goods are sold, the Company has flexibility to terminate (or renegotiate) an agreement with a consignment vendor in arriving at the appropriate merchandise and appropriate price points mix to meet customer demand in a specific store’s market. When new and existing consignment vendors acquire or increase their allocation of store space, the Company can make necessary adjustments to the merchandise and price point mix provided by such consignment vendors. The use of DP suppliers that produce DP Goods exclusively for the Company allows the Company to change merchandise presentations quickly and adapt to new trends.

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Gross sales growth and productivity improvements are driven by a number of factors, including the company’s merchandising strategy, which may be adjusted to respond to external economic and operating conditions, its refurbishment programmes and its new store opening programmes. Management believe the Company’s strong relationship with a broad and diverse supplier base allows the Company to effectively adjust its merchandising strategy to respond to both customers’ preferences and external economic and operating conditions.

The Company closely monitors under-performing stores and it changes its merchandise mix and price points. If these changes do not improve performance to acceptable levels, it may seek to identify potentially better locations for the relevant stores and, in certain circumstances, close or modify under-performing stores or open new stores in different locations to replace them.

Store productivity can be enhanced by refurbishment. The Company has refurbished 16, 13, and 17 stores, in 2010, 2011, and 2012, respectively, and plans to refurbish between 17% and 20% of stores each year. If a store is refurbished, the Company incurs additional capital expenditure of between approximately Rp3.1 billion and Rp6.2 billion per store (USD300,000 and USD600,000). Capital expenditure can vary by region due to regional variations in transportation costs and labour costs, but Management expect to maintain a similar capital expenditure to Gross Sales ratio in the near to mid-term in line with historical results.

The Company refurbishes its stores on a phased basis so that entire stores are not closed. A store’s Gross Sales and profitability are, at times, temporarily impacted by the disruption caused by refurbishments, but sales levels generally recover and then exceed the prior years’ performance for similar stores following the refurbishment.

The rate of refurbishment during the period under review has been and is expected to be relatively constant. Management do not believe that disruptions associated with refurbishment plans will have a material impact on its results of operations going forward as compared to historical results of operations.

Expansion programme

As the Company opens new stores and increases the total number of stores that it operates, its Gross Sales, net revenue and cost of revenue increase. Although the Company capitalises the cost of fitting-out new stores, opening new stores increases the Company’s operating expenses, such as additional rent, salary and wages, depreciation, energy, distribution and insurance expenses.

A new store typically generates operating profit in its first year, and MDS earns back its capital investment in the new store within three to four years. Only after four to five years, a new store’s productivity, net revenue and Adjusted EBITDA margin typically converges on the average revenue for a similarly sized store, As such, new stores tend to be less profitable in the early years than more mature stores. For any given period, the opening of new stores will tend to reduce gross profit margins until the new store matures and its gross profit margin converges on the average gross profit margin.

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The following table presents, for the dates indicated, the total number of stores the Company operated, the number of new stores opened during the relevant period and the number of stores closed during the period:

As at 31 December 2010 2011 2012 TOTAL STORES ...... 95 103 116 Java ...... 61 68 75 Sumatra ...... 16 17 18 Kalimantan, Sulawesi and Maluku ...... 15 15 19 Others(1) ...... 334 NEW STORES OPENED ...... 79(2) 13 Java ...... 377 Sumatra ...... 311 Kalimantan, Sulawesi and Maluku ...... 114 Others(1) ...... - - 1 STORES CLOSED...... - 1(3) - Java ...... - - - Sumatra ...... - - - Kalimantan, Sulawesi and Maluku ...... - 1(3) - Others(1) ...... - - - Total selling space (square metres) ...... 636,911 677,826 750,024

(1) Others comprises the Bali stores in 2010 and 2011. Others in 2012 comprises stores in Bali and Papua. (2) Includes the opening of one additional store to replace a store closed due to fire. (3) Store closed due to fire.

The Company’s expansion programme has increased its selling space to 636,911 square metres, 677,826 square metres and 750,024 square metres as at 31 December 2010, 2011 and 2012, respectively.

The Company continues to build its pipeline of new stores and currently plans to open approximately 15 stores per year in the period from 2013 to 2015.

The success of a new store is dependent on a number of factors, of which some are within the Company’s control, including the successful integration of the new stores with its existing operations and the achievement of related synergies, and the successful introduction of an optimal mix of merchandise which successfully meets target local consumer preferences at attractive prices. However certain other factors are outside of the Company’s control, including the success and operation of the mall where the new store is located and the local competition that is faced by the Company. In addition, the Company’s ability to expand into new areas is dependent on the development of infrastructure and the construction of new shopping malls in these areas. See Section 4 – “Risk Factors – The Company’s planned expansion programme may not proceed as expected”.

Merchandise mix The mix of the Company’s merchandise between Consignment Goods and DP Goods impacts the Company’s Gross Sales, net revenue, and cost of revenue, but has not historically impacted its profitability due to the similar effective contribution margins achieved for DP Sales and CV Sales after taking into account the directly attributable costs across both categories. Effective contribution margin is the adjusted gross profit from DP and CV Sales less certain costs that Management allocate to DP or CV Sales (“Effective Contribution Margin”). Because consignment vendors maintain their own inventory (owning the merchandise until time of sale which reduces demands on the Company to maintain higher levels of inventory), and bear all purchasing, payroll, working capital, distribution and warehousing costs, Management calculate the Effective Contribution Margin from CV Sales based on adjusted gross profit margin from CV Sales by adding amounts to adjust for the costs of carrying inventory and subtracting amounts to adjust for the costs of head office expenses. Effective Contribution

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Margin from DP Sales is calculated by subtracting amounts to account for the costs of carrying inventory, store selling payroll, transport and head office expenses. For these reasons, Management believe the Effective Contribution Margins of Consignment Goods and DP Goods are similar.

A significant proportion of the Company’s net revenue (42.1%, 44.2%, and 42.9% in 2010, 2011 and 2012, respectively) comprises net revenue on Consignment Sales. This net revenue typically comprises a guaranteed minimum gross profit amount and a consignment margin based on the amount of Consignment Sales. See Section 14 – “Business - Consignment Sales”. CV Sales amounted to Rp5,537.8 billion, Rp6,629.1 billion and Rp7,712.1 billion, respectively, in 2010, 2011 and 2012, which accounted for 70.0%, 71.7% and 70.9% of Gross Sales for such periods. Net revenue on Consignment Sales in 2010, 2011 and 2012 amounted to Rp1,722.6 billion, Rp2,078.8 billion and Rp2,406.9 billion, respectively. Management believe that its consignment margins will remain stable for the foreseeable future given the strength of its relations with consignment vendors and the strength of the Matahari Department Store brand.

Consignment vendors are regularly evaluated by the Company and may be replaced if they are not performing in accordance with its expectations. The Company believes it has a stable consignment vendor base and replacements are typically made to improve business performance in the ordinary course of business. The consignment margins on Consignment Goods can be changed when an agreement with a consignment vendor is being entered into or renewed, which tends to occur on a bi-annual basis. The prices the Company charges for its DP Goods are affected by a number of factors, including the Company’s cost of sales, the Company’s terms with suppliers, overall supply and demand for retail consumer products in Indonesia, competition, inflation (or deflation), seasonality, inventory volume, inventory age, fashion and consumer trends, promotions and manufacturer recommendations. Given the diverse range of DP Goods it carries, the pricing strategy for any particular retail product rarely has a material impact on the Company’s net revenue. National promotional activities, such as discounts or rebates designed to increase market share and/or clear out of date inventory, may also materially affect sales, revenue and profitability in a given period. The Company has flexibility to change the price of, and gross profit margin on DP Goods.

Controlling operating expenses

Operating expenses increase due to increased activity at existing stores, the opening of new stores as part of the Company’s expansion programme and general increases in the costs of wages, commodities and goods due to inflation and other macroeconomic forces. The Company has focused on controlling its operating expenses and has achieved lower levels of growth in operating expenses as compared with increases in Gross Sales, which has had a positive effect on the Company’s Adjusted Gross Profit and Adjusted EBITDA Margins. Operating expenses as a percentage of Gross Sales have decreased from 20.5% in 2010 to 20.0% in 2011 and 19.6% in 2012. The Company has achieved slower growth in operating expenses by using cost-control programmes designed to contain the growth of its selling, general and administrative, and other expenses, including optimising its distribution and logistics operations, as well as using its purchasing power with suppliers to negotiate for better prices.

The Company’s key operating expenses are employee costs, rent, utilities and telecommunications and marketing expenses. The Company’s operating expenses increase due to increases in the minimum wage, general increases in wages due to inflation and in the prices of fuel, electricity and raw materials as well as increases associated with increased volumes as the business expands. When the Company opens new stores, it incurs increased expenses, such as additional rent, salary and wage, depreciation, energy and insurance expenses.

Salaries and allowances as a percentage of Gross Sales were 5.6%, 5.5% and 5.7% in 2010, 2011 and 2012, respectively. Salaries and allowances increased 13.5% in 2011 and 21.7% in 2012. The Company is required to increase the wages paid to the Company’s employees to comply with increases in minimum wage regulations which occur each year. The increase in 2011 was approximately 11% and the increase in 2012 was approximately 13%, which was higher than in previous years due to nationwide regulatory revisions in minimum wage policy. The Company endeavours to remain competitive with wage levels at other retail operators. Wages

Page 79 ------12. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------also increase as additional staff are employed in connection with the opening of new stores. See Section 14 – “Business – Staffing”.

The Company incurs annual rent associated with its stores, which are all leased, its headquarters and its distribution centre. The Company incurred rent expenses of Rp561.2 billion, Rp629.4 billion and Rp694.5 billion in 2010, 2011 and 2012 respectively, representing 30.7%, 33.8% and 32.7% of the Company’s operating expenses for the corresponding periods. The Company typically enters into long term lease agreements. Out of the current store base of 116 stores, 42 stores have leases with affiliated parties including MPP, Lippo Karawaci and LMIR REIT, which represent approximately 36.2% of the Company’s stores as at the Latest Practicable Date and 34.5%, 32.8% and 32.6% of total rent expenses in 2010, 2011 and 2012, respectively.

The Company’s leases can be categorised as (i) fixed rent or (ii) variable rent (including blanket agreement arrangements). Fixed rents are quoted per square metre and mainly in Rupiah (except for leases for three stores which are denominated in foreign currencies), with escalations during the contract periods. Variable rents are calculated as a percentage of the store’s Gross Sales subject to minimum rents. Blanket arrangements relate to certain properties leased from affiliated parties, and is based off a reference to rental rates paid to third party landlords. When possible, the Company seeks to agree a fixed rent as the Company typically is able to achieve higher sales growth than fixed rent escalation. See Section 14 – “Business – Store Leases”.

Utilities and telecommunications have increased (8.2% in 2011 and 5.6% in 2012) due to the Company opening more stores and increases in utility prices.

Marketing expenses have increased (20.2% in 2011 and 36.8% in 2012) as the Company has pursued its growth strategy. Marketing expenses are expected to continue to grow, but remain a similar proportion of sales.

Operational services, which mainly comprise security and cleaning services, have increased (13.5% in 2011 and 24.9% in 2012) as the Company has opened new stores and in line with minimum wage increases.

The Company maintains a low level of inventory shrinkage (or the loss of merchandise for any reason between point of delivery from suppliers and point of sale) by the use of an in-house distribution team, electronic article surveillance system for high-price merchandise and tight inventory control. These practices have helped the Company achieve low levels of inventory shrinkage with respect to its DP Goods that did not exceed 1.3% from 2010 to 2012 and was 1.1% in 2012. The Company is not responsible for inventory shrinkage with respect to Consignment Goods.

Inflation

The Company’s results are affected by inflation through increases in the costs of its Consignment Goods and DP Goods, staff costs and other costs. Although significant inflation can dampen overall demand for the Company’s DP and consignment goods as consumers have less discretionary income to spend, inflation at manageable levels, while increasing its costs, tends to actually benefit its business, as inflation-led price increases have a positive impact on its margins. Consumers in its target middle class segment generally have more disposable income so they can typically absorb a portion of consumer price increases. Significant inflation will negatively impact the demand for the Company’s products. According to Euromonitor, Indonesia’s annual inflation rate, as measured by changes in Indonesia’s consumer price index, was 5.1% in 2010 and 5.4% in 2011 and was forecasted to be 4.4% in 2012.

Seasonality

The Company’s stores experience sales seasonality throughout the year. The Company promotes and advertises based on key events and holidays such as Lebaran, the June-July period covering school holidays (‘back to school’), Chinese New Year and Christmas. The 44 days prior to Lebaran accounted for 24.9%, 25.1% and 25.3% of Gross Sales in 2010, 2011 and 2012, respectively. In the month prior to Lebaran, all employees in Indonesia receive an allowance of a month’s salary in accordance with Indonesian labour laws. This increases customers’ disposable income immediately prior to Lebaran and has a positive impact on Gross Sales. The

Page 80 ------12. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------mandated allowance also increases the Company’s general and administrative expenses, specifically salaries and allowances, in the quarter in which the payment occurs, but those increased expenses are small relative to the increase in Gross Sales and net revenue during the period. The date of Lebaran changes from year to year and the peak in sales may span different quarters in different years. During the period under review, the Lebaran period was the 44 traditional celebration days prior to 11 September 2010, 31 August 2011 and 20 August 2012.

The months of June and July, which coincide with school holidays and overlap with the Lebaran period accounted for 16.6%, 17.6%, 19.3% of Gross Sales in 2010, 2011 and 2012, respectively.

The Company also sees increases around Chinese New Year and Christmas. Following Christmas, the Company’s sales return to average levels.

Each of these peak periods has a positive impact on the Company’s results. In addition to Lebaran and Chinese New Year, there are several other holidays throughout the year that do not occur on fixed dates. Consequently, the results of a given interim financial period may or may not be directly comparable to results from the preceding interim period or to the corresponding period in prior years. To the extent that any of these peak sales periods overlap in a particular year, Gross Sales may suffer at that particular period relative to years in which the peak sales periods did not overlap. Gross Sales can also be impacted by the number of pay periods spanned by a particular peak season. If more pay periods than usual are spanned, the Company may experience increased sales. Likewise, a smaller than usual number of pay periods during the peak season can have a negative impact.

See Section 4 – “Risk Factors – The Company’s business is subject to significant fluctuations due to seasonality”.

Geographical diversity

A significant proportion of the Company’s Gross Sales are generated from the Company’s stores in Java (62.8%, 62.4%, and 61.9% for 2010, 2011 and 2012, respectively), but due to increased competition, the Java stores exhibit lower Gross Sales per square metre of Retail Space than the total average across all regions. SSSG has been positive and Gross Sales per square metre of Retail Space have increased in each geographical segment during the period under review. Stores in Sumatra have exhibited higher than average productivity across the period. SSSG can be affected by the inclusion of newer stores, because it takes new stores four to five years to mature and to exhibit average growth rates. Due to several new stores being opened in 2010, SSSG in Sumatra in 2012 was lower. In a period of higher than average growth achieved in a preceding year, SSSG may experience a decline in the following year, as reflected in 2012. The stores in Bali and Papua, which comprise the “Others” category, have higher productivity due to less competition in these locations.

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The following table sets forth SSSG and Gross Sales per square metre of Retail Space by the Company’s geographical segments.

Years ended 31 December 2010 2011 2012 %

Java ...... 10.8 12.9 11.5 Sumatra ...... 11.4 15.1 8.6 Kalimantan, Sulawesi and Maluku ...... 12.4 16.5 11.3 Others ...... 11.9 10.3 13.3 Total SSSG (%) ...... 11.2 13.6 11.1

(Rp thousands)

Java ...... 12,550 13,611 14,479 Sumatra ...... 13,993 14,968 16,043 Kalimantan, Sulawesi and Maluku ...... 13,922 16,622 17,811 Others ...... 17,344 19,186 21,638 Gross Sales per square metre of Retail Space ...... 13,165 14,461 15,466

Competition

The Indonesian retail industry is highly competitive, particularly with respect to merchandise mix and quality, store location, design and ambiance, inventory, price, customer service, credit availability and advertising. Currently, MDS is the largest department store retailer in Indonesia that focuses on the middle income segment. The Company faces increased competition from existing department stores and specialist retailers and from new entrants to the markets in which it operates, including international retailers currently only operating in offshore markets but who are targeting the Company’s customer base. While there are high barriers to entry in the Company’s chosen market, actions taken by the Company’s competitors and actions taken by the Company both proactively and in response to competitive pressures may impact its results of operations.

Similarly, the Company competes with other department stores for locations for its stores. See Section 14 – “Business – Competition” and Section 4 – “Risk Factors – The Company is operating in an increasingly competitive retail landscape”.

Bank borrowing and interest rates

Increases in debt and fluctuations in interest rates impact the Company’s finance costs. The Company has historically been debt free and has funded its operating expenses and capital expenditures through cash generated from operations.

For 2010, 2011 and 2012, the Company’s finance costs were Rp436.9 billion (excluding a pro forma adjustment of Rp121.6 billion), Rp536.8 billion and Rp451.5 billion, respectively, reflecting a decrease in the Company’s debt in 2011 following voluntary prepayments of principal of Rp400.0 billion in 2011 and Rp350.0 billion in 2012 in addition to scheduled repayments of principal. Management intend to continue to direct cash generated from operations to repay its outstanding indebtedness.

In April 2010, the Company incurred indebtedness of Rp3,250.0 billion through a syndicated loan, which was used to on-lend to PT Meadow Indonesia and for other corporate purposes. At the same time, PT Meadow Indonesia, the Company’s parent prior to the merger, obtained the Vendor Loan, which partially funded PT Meadow Indonesia’s acquisition of the Company’s Shares. The Vendor Loan carried an interest rate of 13%. In August 2012, the Company raised an additional Rp1,225.0 billion from a new tranche under its syndicated loan facility and used the proceeds to repay the Vendor Loan in full. This will have the effect of decreasing overall interest costs going forward.

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In March 2013, the Company renegotiated its syndicated loan facilities. See “– Financial Instruments – Senior Facilities Agreement”.

The Board of Directors has approved a voluntary prepayment of the Company’s debt under its syndicated loan facility of up to Rp800 billion. Rp700 billion was prepaid on 4 March 2013. Management intend to make additional prepayments throughout the year in 2013 to reduce interest costs. There is no penalty for prepayments. Management target to reduce debt through voluntary prepayment and scheduled repayments in the range of Rp1,200 billion to Rp1,500 billion in 2013, and targets to do the same in 2014 subject to business conditions and operational cash needs. Management believe the minimum cash balance required for the efficient operation of MDS’ business at any given time is Rp150 billion.

RECENT DEVELOPMENTS

Trading update

Debt position

MDS has also negotiated an amendment of its syndicated loan facilities on 1 March 2013. The amendment provides for the release of security that had been provided by certain shareholders of MDS over their MDS shares and a change to the definition of Change of Control used in the facilities agreement. The amended facilities agreement also provides for a reduction in the percentage excess cash flow that must be used to prepay the loans under the facilities to 30%. In connection with the amendment of the syndicated lending facilities, a voluntary prepayment of Rp700.0 billion was made by MDS on 4 March 2013. See “– Significant Factors Affecting the Company’s Results of Operations – Bank borrowings and interest rates” and “– Senior Facilities Agreement.”

On 5 March 2013, the Company drew down Rp250.0 billion on its revolving credit facility.

DESCRIPTION OF SELECTED LINE ITEMS IN THE STATEMENT OF COMPREHENSIVE INCOME

The following discussion provides a description of the composition of certain line items in the Company’s statement of comprehensive income for the periods indicated. See “– Basis of Preparation”

Net revenue

The Company’s net revenue comprises retail sales, net revenue from consignment sales and certain services fees. Revenue from sales of DP Goods and CV Goods is recognised when goods are delivered to customers at the point of sale.

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Retail sales. Retail sales revenue comprises sales of trading products comprising DP Goods (including private label brands), also referred to as DP Sales, net of sales discounts and value added tax.

Net revenue on consignment sales. Net revenue on consignment sales comprises revenue from the sale of Consignment Goods to consumers less amounts payable to the relevant consignment vendor.

Service fees. Service fees primarily comprise distribution centre income earned by providing logistics services to third parties.

Service fees also comprise fees paid for consultancy and management services provided to MI on developments in the Indonesian retail sector. This component of service fees ceased in 2011 when MI was merged into the Company.

Services fees are recognised when services are performed, provided that the amount can be measured reliably. The services fees generated by the distribution centre are payable under agreements with each consignment vendor.

Cost of revenue

Cost of revenue represents primarily the costs of DP Goods sold during the period. Cost of revenue also includes the cost of services provided which generate service fees such as distribution centre income. These expenses are recognised at the time of sale.

Gross profit

Gross profit comprises net revenue less cost of revenue.

Selling expenses

Selling expenses primarily comprise rent expenses, marketing expenses, operational services, credit card transaction fees and plastic bags.

General and administrative expenses

General and administrative expenses primarily comprise salaries and allowances, utility and telecommunication costs, depreciation, consultant fees, insurance, business travel, repair and maintenance, tax and license expenses, amortisation and tools.

Other gain/(losses) – net

In 2012, other gains/(losses) – net primarily comprises a gain for insurance proceeds received in conjunction with losses due to a fire in a store in 2011. Other gains also includes the value of expired MCC vouchers and the sale of surplus cardboard boxes.

In 2011, other gains/(losses) – net comprises losses due to a fire in a store (a portion of which was subsequently recovered from insurance proceeds in 2012), a loss on the sale of fixed assets comprising fixtures and equipment and other expenses.

In 2010, other gains/(losses) – net primarily comprises a charge for the difference in value from restructuring transactions among entities under common control offset by a gain on the sale of fixed assets and other gains. See “– Basis of Preparation” and description of other comprehensive loss below.

Finance income

Finance income primarily comprises interest from bank deposits and interest income.

Finance cost

Finance cost primarily comprises interest on borrowings and amortisation of borrowing transaction costs.

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Other comprehensive income/(loss)

Other comprehensive income/(loss) items comprise the origination and reversal of differences in value from restructuring transactions among entities under common control.

The originated difference in value from restructuring transactions among entities under common control reflects the difference between the transfer price paid when MI acquired the Company and the book value of MI’s net assets as at the acquisition date.

The reversal of difference in value from restructuring transactions among entities under common control reflects the difference in value between the transfer price and book value among entities under common control following restructuring transactions that is reversed when common control ceases, as occurred in 2010 when the Company was acquired by MI and common control with MPP ceased.

RESULTS OF OPERATIONS FOR 2010, 2011 AND 2012

Years ended 31 December Proforma 2010 2011 2012 (unaudited)(1) (audited) (audited) (Rp billions) Revenue – Retail sales ...... 2,349.9 2,595.4 3,174.8 – Net revenue from consignment sales ...... 1,722.6 2,078.8 2,406.9 – Services fee ...... 18.5 26.5 35.2 Net revenue...... 4,091.0 4,700.7 5,616.9 Cost of revenue ...... (1,468.4) (1,595.2) (1,910.8) Gross profit ...... 2,622.5 3,105.5 3,706.1 Selling expenses ...... (805.5) (912.9) (1,049.6) General and administrative expenses ...... (817.7) (937.4) (1,082.6) Other gains/(losses) – net ...... (204.0) (13.9) 10.4 Operating profit ...... 795.5 1,241.3 1,584.3 Finance income ...... 23.0 31.1 26.2 Finance cost ...... (558.6)(2) (536.8) (451.5) Finance expense – net ...... (535.6) (505.7) (425.3) Profit before income tax ...... 259.9 735.6 1,159.0 Income tax expense ...... (238.9) (269.9) (388.1) Net profit ...... 21.0 465.7 770.9 Other comprehensive income/(loss) Difference in value from restructuring transactions among entities under common control ...... (3,767.1) - - Reversal of difference in value from restructuring transactions among entities under common control ...... 210.8 - - Comprehensive income/(loss) ...... (3,535.3) 465.7 770.9

(1) See “Important Information—Presentation of Financial Information”. Figures for 2010 in this table and throughout Section 12 are taken from Section 9 – “Unaudited Pro Forma Combined Financial Information”. The pro forma combined statement of comprehensive income has been prepared and presented based on the Company’s historical statement of comprehensive income for 2010 to illustrate the effects of the Acquisition and Merger between the Company and MI as described in Section 15 – “Corporate and Shareholding Structure” as if the Acquisition and Merger had occurred on 1 January 2010. See Section 9 – “Unaudited Pro Forma Combined Financial Information”. (2) Includes a Rp121.6 billion adjustment for finance cost that would have been incurred had the Acquisition taken place on 1 January 2010. See Section 9 – “Unaudited Pro Forma Combined Financial Information”.

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Comparison of the results of operations for 2011 and 2012

Net revenue

The Company’s net revenue increased by Rp916.2 billion, or 19.5%, from Rp4,700.7 billion in 2011 to Rp5,616.9 billion in 2012. This increase was primarily due to an increase in Gross Sales of 17.7% due to increases in SSSG of 11.1% in 2012, growth of the Company’s target customer segment, increased disposable income of that customer segment, improvements in merchandise mix, the opening of 13 new stores and the refurbishment of 15 stores.

The Company’s retail sales, which primarily comprises DP Sales, increased by Rp579.4 billion, or 22.3%, from Rp2,595.4 billion in 2011 to Rp3,174.8 billion in 2012. This increase was due to the reasons described above and, in particular, increased demand for DP Goods.

The Company’s net revenue from CV Sales increased by Rp328.1 billion, or 15.8%, from Rp2,078.8 billion in 2011 to Rp2,406.9 billion in 2012. This increase was due the reasons described above, offset in part by a shift from CV Sales to DP Sales.

The Company’s services fees increased by Rp8.7 billion, or 32.8%, from Rp26.5 billion in 2011 to Rp35.2 billion in 2012. This increase was principally due to increased use by consignment vendors of the Company’s distribution and logistics centre to deliver their products to the Company’s stores.

Cost of revenue

The Company’s cost of revenue increased by Rp315.6 billion, or 19.8%, from Rp1,595.2 billion in 2011 to Rp1,910.8 billion in 2012. This increase was due to the 22.3% increase in retail sales, primarily comprising DP Goods, as described above.

Cost of revenue grew less quickly than retail sales due to the Company’s increased purchasing power from increased volume of DP Goods purchased and other initiatives such as the key item programme, which aimed to optimise the number of SKUs in order to improve Adjusted Gross Profit Margins for DP Sales. Cost of revenue as a percentage of retail sales in 2012 was 60.2% which represented a decrease from 61.5% in 2011.

Gross profit

Due to the factors described above, the Company’s gross profit increased by Rp600.6 billion, or 19.3%, from Rp3,105.5 billion in 2011 to Rp3,706.1 billion in 2012 primarily due to increased contribution from CV Sales and DP Sales. Adjusted Gross Profit from DP Sales increased by 23.2%. Adjusted Gross Profit from CV Sales, which is measured by net revenue from CV Sales, increased by 15.8% in 2012.

Selling expenses

The Company’s selling expenses increased by Rp136.7 billion, or 15.0%, from Rp912.9 billion in 2011 to Rp1,049.6 billion in 2012. This increase was primarily due to increases in rent, marketing expenses and operational services.

In 2012, rent increased by Rp65.1 billion, or 10.3%, due to the opening of 13 new stores. Marketing expenses increased Rp38.3 billion, or 36.8% in 2012 primarily due to the launch of aggressive in-store promotions in the cosmetics and home departments. Marketing expenses also increased due to the opening of new stores and from increases in the costs of marketing activities. Operational services, which comprises security and cleaning services at the Company’s stores, increased Rp23.6 billion, or 24.9% in 2012 due to the opening of 13 new stores and increases in the minimum wage.

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The table below sets forth the components of selling expenses in 2011 and 2012.

Increase between 2011 2011 2012 and 2012 (Rp billions) (Rp billions) (%)

Rent ...... 629.4 694.5 10.3 Marketing ...... 104.1 142.4 36.8 Operational services ...... 94.7 118.3 24.9 Credit card ...... 35.6 38.9 9.3 Plastic bags ...... 23.4 25.0 6.8 Others ...... 25.7 30.5 18.7 Total ...... 912.9 1,049.6 15.0

General and administrative expenses

The Company’s general and administrative expenses increased by Rp145.2 billion, or 15.5%, from Rp937.4 billion in 2011 to Rp1,082.6 billion in 2012. This increase was primarily due to an increase in salaries and allowances of Rp109.9 billion or 21.7% due to increases in the minimum wage (which accounted for a 13.1% increase in staff costs), increased staffing due to the opening of 13 new stores and increased activity in existing stores; increases in utility and telecommunication costs of Rp9.9 billion or 5.6% and increases in insurance of Rp6.2 billion or 27.2% due to 13 new stores; and increases in depreciation of Rp18.9 billion or 12.0% due to the increase in the numbers of stores and the refurbishment of 15 stores in 2012. Expenses associated with taxes and licenses increased 61.9% due to government increases in the amounts for taxes and licenses. Increases in overall general and administrative expenses were offset by decreases in consultant fees and business travel.

The table below sets forth the components of general and administrative expenses in 2011 to 2012.

Increase between 2011 2012 2011 and 2012 (Rp billions) (Rp billions) (%) Salaries and allowances ...... 505.3 615.2 21.7 Utility and telecommunications ...... 176.4 186.3 5.6 Depreciation...... 157.2 176.1 12.0 Consultant fees...... 23.6 15.9 (32.6) Business travel ...... 19.8 19.0 (4.0) Repair and maintenance ...... 14.6 17.0 16.4 Insurance ...... 22.8 29.0 27.2 Tax and license ...... 9.7 15.7 61.9 Amortisation ...... 2.4 4.0 66.7 Tools ...... 2.2 2.2 0.0 Others ...... 3.4 2.2 (35.3) Total ...... 937.4 1,082.6 15.5

Other gains/(losses) – net

The Company’s other gains/(losses) – net changed by Rp24.3 billion from a loss of Rp13.9 billion in 2011 to a gain of Rp10.4 billion in 2012.

Other gains/(losses) included a Rp9.3 billion loss in 2011 from a fire that destroyed a store which was offset by a gain of Rp5.4 billion in 2012 following the receipt of a portion of the insurance proceeds reimbursing that loss. The Company expects the loss due to fire to be fully reimbursed in 2013.

In 2012, the Company had other gains of Rp2.6 billion due to MCC vouchers expiring and Rp1.2 billion from foreign exchange gains.

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Finance income

The Company’s finance income decreased by Rp4.9 billion, or 15.8%, from Rp31.1 billion in 2011 to Rp26.2 billion in 2012 because the Company had less cash on hand following prepayments on the syndicated loan facility of Rp400.0 million in 2011 and Rp350.0 million in 2012 and a prepayment of rent expenses in 2012.

Finance cost

The Company’s finance cost decreased by Rp85.3 billion, or 15.9%, from Rp536.8 billion in 2011 to Rp451.5 billion in 2012. This decrease was due to decreases in the Company’s outstanding indebtedness following accelerated prepayment of loan principal under the syndicated loan facility of Rp350.0 billion in March 2012. Decreased finance costs also reflects lower overall interest rates following the repayment of the Vendor Loan in August 2012 and the drawn down of the syndicated loan facility which reduced the interest rate from 13% under the Vendor Loan to JIBOR + 4.75% under the syndicated loan. See “– Financial Instruments – Senior Facilities Agreement – Maturity and interest”.

Finance expense-net

The Company’s finance expense-net decreased by Rp80.4 billion, or 15.9%, from Rp505.7 billion in 2011 to Rp425.3 billion in 2012. This decrease was primarily due to a decrease in interest paid because of a decrease in the Company’s outstanding indebtedness.

Profit before income tax

The Company’s profit before income tax increased Rp423.4 billion, or 57.6% from Rp735.6 billion in 2011 to Rp1,159.0 billion in 2012 due to reasons described above including, the 19.5% increase in net revenue, the increase of gross profit to Rp3,706.1 billion and a decrease in finance expenses of Rp80.4 billion.

Income tax expense

Due to the increase in profit, the Company’s income tax expense increased Rp118.2 billion, or 43.8%, from Rp269.9 billion in 2011 to Rp388.1 billion in 2012.

Net profit

For the reasons described above, the Company’s net profit increased Rp305.2 billion, or 65.5% from Rp465.7 billion in 2011 to Rp770.9 billion in 2012.

Comparison of the results of operations for 2010 (on a pro forma basis) and 2011

Due to the accounting treatment under PSAK No. 38 “Accounting for Restructuring Transactions of Entities Under Common Control” for the Acquisition and Merger, the pre-acquisition income and expenses of the Company for the period from 1 January 2010 to 31 March 2010 were excluded from the historical financial statements for the year ended 31 December 2010. Consequently, the historical statement of comprehensive income and cash flows of the Company for 2010 presented twelve months of MI’s results of operations and cash flows but only nine months (i.e. 1 April 2010 to 31 December 2010) of MDS’ results of operations and cash flows. Accordingly, the historical results of operations and cash flows for 2010 are not comparable with those for 2011. In order to provide investors with a more meaningful representation of the Company’s results of operations for 2010, the Company has prepared a pro forma combined statement of comprehensive income for 2010 to illustrate the effects of the Acquisition and Merger between the Company and MI as described in Section 15 – “Corporate and Shareholding Structure” as if the Acquisition and Merger had occurred on 1 January 2010 for its pro forma combined statement of comprehensive income. See Section 9 – “Unaudited Pro Forma Combined Financial Information”.

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The 2010 financial information for the selected items in the statement of comprehensive income discussed below is presented on a pro forma basis (unless otherwise indicated).

Net revenue

The Company’s net revenue increased by Rp609.7 billion, or 14.9%, from Rp4,091.0 billion in 2010 to Rp4,700.7 billion in 2011. This increase was driven primarily by SSSG of 13.6% in 2011 due to growth of the Company’s target customer segment, increased disposable income of that customer segment, improvements in merchandise mix, the opening of eight new stores (excluding one store that replaced a store closed due to fire) and the refurbishment of 13 existing stores. These factors are reflected in increases across each component of revenue – retail sales, net revenue from CV Sales and services fees.

The Company’s retail sales, primarily accounting for DP Sales, increased by Rp245.5 billion, or 10.4%, from Rp2,349.9 billion in 2010 to Rp2,595.4 billion in 2011. DP Sales have been positively affected by changes in the DP portfolio, including phasing out high volume/low cost products, which have increased average selling prices.

The Company’s net revenue from CV Sales increased by Rp356.2 billion, or 20.7%, from Rp1,722.6 billion in 2010 to Rp2,078.8 billion in 2011.

The Company’s services fees increased by Rp8.0 billion, or 43.2%, from Rp18.5 billion in 2010 to Rp26.5 billion in 2011. This increase was due to increased use by Consignment Vendors of the Company’s distribution and logistics services to deliver their products to the Company’s stores and third parties.

Cost of revenue

The Company’s cost of revenue increased by Rp126.8 billion, or 8.6%, from Rp1,468.4 billion in 2010 to Rp1,595.2 billion in 2011. This increase reflects the 10.4% increase in retail sales, as described above. Cost of revenue grew less quickly than DP Sales due to the Company’s increased purchasing power from an increased volume of DP Goods purchased and other initiatives such as the key item programme, which aimed to optimise the number of SKUs in order to improve Adjusted Gross Profit Margins for DP Sales. Cost of revenue as a percentage of retail sales in 2011 was 61.5% which represented a decrease from 62.5% in 2010.

Gross profit

The Company’s gross profit increased by Rp483.0 billion, or 18.4%, from Rp2,622.5 billion in 2010 to Rp3,105.5 billion in 2011 primarily due to increased contribution from CV Sales and DP Sales. Adjusted Gross Profit from CV Sales, which is measured by net revenue from CV Sales, increased by 20.7% in 2011. Adjusted Gross Profit from DP Sales increased by 13.9% in 2011.

Selling expenses

The Company’s selling expenses increased by Rp107.4 billion, or 13.3%, from Rp805.5 billion in 2010 to Rp912.9 billion in 2011. This increase was due to primarily due to a 12.2% increase in rent of Rp68.2 billion due to the opening of nine new stores and rent escalations attributable to lease contracts and renewals.

The increase in selling expenses is also attributable to a 20.2% increase in marketing expenses of Rp17.5 billion from Rp86.6 billion in 2010 to Rp104.1 billion in 2011 due to the opening of nine new stores and an increasing focus on marketing activities as a key driver of sales growth.

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The following table sets forth the components of selling expenses in 2010 (on a pro forma basis) and 2011. Increase between 2010 (pro 2010 2011 forma) and 2011 (pro forma) (1) (Rp billions) (Rp billions) (%) Rent ...... 561.2 629.4 12.2 Marketing ...... 86.6 104.1 20.2 Operational services ...... 83.4 94.7 13.5 Credit card ...... 31.1 35.6 14.5 Plastic bags ...... 20.1 23.4 16.4 Others ...... 23.1 25.7 11.3 Total ...... 805.5 912.9 13.3

(1) Figures for 2010 in this table and throughout Section 12 are taken from Section 9 – “Unaudited Pro Forma Combined Financial Information”. See Section 9 – “Unaudited Pro Forma Combined Financial Information”.

General and administrative expenses

The Company’s general and administrative expenses increased by Rp119.7 billion, or 14.6%, from Rp817.7 billion in 2010 to Rp937.4 billion in 2011. This increase was primarily due to a 13.5% increase in salaries and allowances of Rp60.1 billion from Rp445.2 billion in 2010 to Rp505.3 billion in 2011 due to increases in the minimum wage of 11%, general inflation related increases, an increase in the number of employees to staff a nine new stores and increased activity in existing stores.

The Company expenditures on utility and telecommunications increased by Rp13.4 billion, or 8.2%, from Rp163.0 billion in 2010 to Rp176.4 billion in 2011. This increase was primarily due to the opening of nine new stores and general cost increases of utilities.

Depreciation increased by Rp16.3 billion, or 11.6%, from Rp140.9 billion in 2010 to Rp157.2 billion in 2011 due to the opening of nine new stores and the refurbishment of 13 existing stores in 2011.

Consultant fees increased by Rp20.9 billion, or 774.1%, from Rp2.7 billion in 2010 to Rp23.6 billion in 2011 due to an increased use of consultants and legal advisers as a result of the Acquisition and the Merger.

The following table sets forth the components of general and administrative expenses in 2010 (on a pro forma basis) and 2011. Increase between 2010 (pro 2010 2011 forma) and 2011 (pro forma) (1) (Rp billions) (Rp billions) (%) Salaries and allowances ...... 445.2 505.3 13.5 Utility and telecommunications...... 163.0 176.4 8.2 Depreciation ...... 140.9 157.2 11.6 Consultant fees ...... 2.7 23.6 774.1 Business travel ...... 14.3 19.8 38.5 Repair and maintenance ...... 11.7 14.6 24.8 Insurance ...... 22.2 22.8 2.7 Tax and license ...... 6.4 9.7 51.6 Amortisation ...... 1.3 2.4 84.6 Tools ...... 2.4 2.2 (8.3) Others ...... 7.6 3.4 (55.3) Total ...... 817.7 937.4 14.6

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Other gains/(losses) – net

The Company’s other losses – net decreased by Rp190.1 billion, or 93.2% from Rp204.0 billion in 2010 to Rp13.9 billion in 2011. In 2010, other gains/(losses) net primarily comprise the reversal of difference in value from restructuring transactions among entities under common control.

In 2011, other gains/(losses) net include losses due to a fire in a store (which was subsequently recovered from insurance proceeds in 2012), a loss on the sale of fixed assets comprising fixtures and equipment and other expenses.

Finance income

The Company’s finance income increased by Rp8.1 billion, or 35.2%, from Rp23.0 billion in 2010 to Rp31.1 billion in 2011. This increase was primarily due to interest paid on higher amounts of cash on hand.

Finance cost

The Company’s finance cost decreased by Rp21.8 billion, or 3.9%, from Rp558.6 billion in 2010 to Rp536.8 billion in 2011. This movement was impacted by the inclusion of a pro forma adjustment of Rp121.6 billion to record interest expense for the period from 1 January 2010 to 31 March 2010 that would have arisen from the syndicated loan and Vendor Loan borrowed by MI had they been drawn on 1 January 2010. See Section 9 – “Unaudited Pro Forma Combined Financial Information – Pro Forma Adjustments”. On a full year basis, the decrease in finance cost in 2011 was due to lower finance costs following an amendment of the terms of the finance facilities in July 2011 which decreased the interest rate payable on the loans and a voluntary prepayment of Rp400.0 billion on the loan in February 2011 which decreased the balance due.

Excluding the pro forma adjustment, finance cost was Rp436.9 billion in 2010 and finance cost increased Rp99.9 billion or 22.9% in 2011 primarily due to an increase in the Company’s indebtedness following the Acquisition of the Company by MI for which a full year of interest was paid in 2011 in contrast to nine months of interest being paid in 2010.

Profit before income tax

For the reasons described above, the Company’s profit before income tax increased by Rp475.7 billion or 183.0% from Rp259.9 billion in 2010 to Rp735.6 billion in 2011. Profit before income tax was impacted by a Rp121.6 billion adjustment to finance expense-net due to the pro forma adjustments discussed above

Income tax expense

Due to the increase in profit, the Company’s income tax expense increased by Rp31.0 billion or 13.0% from Rp238.9 billion in 2010 to Rp269.9 billion in 2011 due to the increase in profit before income tax and offset by the reduction in non-tax deductible expenses from Rp605.3 billion in 2010 to Rp583.4 billion in 2011. Non-tax deductible expenses include mainly interest expense from the Company’s bank loans and Vendor Loan.

See “– Financial Instruments” and “– Taxation”.

Net profit

For the reasons described above, the Company’s net profit increased by Rp444.7 billion from Rp21.0 billion in 2010 to Rp465.7 billion in 2011.

Other comprehensive income /(loss)

Other comprehensive income/(loss) comprises origination and reversal of the difference in value from restructuring transactions among entities under common control as described below. See description at “– Description of Selected Line Items in the Statement of Comprehensive Income.”

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Difference in value from restructuring transactions among entities under common control

In 2010, the amount recorded as the difference in value from restructuring, Rp3,767.1 billion, is a negative entry that corresponds to the difference between the transfer price and the book value recorded as part of equity. These entries arise from the accounting treatment under Indonesian GAAP (PSAK No. 38) of the Merger of the Company with MI which was treated as a Merger of two entities under common control and accounted for on a carryover basis using a method similar to the pooling-of-interest method in a business combination.

Reversal of difference in value from restructuring transactions among entities under common control

The reversal of difference in value from restructuring transactions among entities under common control in 2010 represents a reversal of Rp210.8 billion that initially originated from the transactions between the Company and MPP in 2009 when they were still entities under common control.

The reversal arose following the Acquisition of the Company by MI, at which point common control of the Company and MPP ceased and the Company was bought under common control with MI.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows for 2010, 2011 and 2012

The following table summarises the Company’s actual historical cash flows for 2010, 2011 and 2012.

(1) Representing the cash flows of the Company for April – December 2010.

The 2010 financial information below represents the results of operations and cash flows of MI for twelve months and the results of operations and cash flows of MDS for the nine-month period from April – December 2010, which is the period following the Acquisition of MDS by MI. See “– Basis of Preparation”. The 2011 and 2012 figures used below represent the operating results of the Company for the years ended 31 December 2011 and 2012.

Net cash flows provided from operating activities

Net cash flows provided from operating activities increased by Rp376.1 billion, or 30.7%, from Rp1,223.7 billion in 2011 to Rp1,599.8 billion in 2012. This increase was primarily due to increased receipts from customers of Rp1,950.8 billion, or 19.5%, from Rp10,025.2 billion in 2011 to Rp11,976.0 billion in 2012. This increase was offset in part by a Rp1,320.1 billion increase in payments to suppliers primarily due to increases in Gross Sales of DP Goods and a Rp271.2 billion increase in payments to employees and others due to increases in the minimum wage, opening of new stores and increased sales activity. Net cash flows provided by operating activities also increased due to a decrease in tax payments of Rp315.8 billion in 2012 and Rp337.4 billion in 2011.

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Net cash flows provided from operating activities decreased by Rp60.0 billion, or 4.7%, from Rp1,283.7 billion in 2010 to Rp1,223.7 billion in 2011. This decrease was primarily due to increases in payments to suppliers and to employees and others which offset increases in receipts from customers. Receipts from customers were Rp10,025.2 billion in 2011 from Rp6,886.5 billion in 2010. Payments to suppliers were Rp6,511.2 billion in 2011 from Rp4,733.2 in 2010. The Rp1,778.0 billion increase in payments to suppliers was primarily due to increases in Gross Sales of DP Goods. Payments to employees and others which were Rp1,984.0 billion in 2011 from Rp771.8 billion in 2010, which includes the Company’s results for the nine months from April to December 2010 following the acquisition. The Rp1,212.2 billion increase in payments to employees and others was due to increased sales activity, partially due to opening new stores and increases in the minimum wage.

Net cash flows provided by operating activities also decreased due to increased tax payments of Rp218.6 billion due to higher profit in 2011 and an increase in receipts of interest income of Rp10.0 billion from Rp21.1 billion in 2010 to Rp31.1 billion in 2011.

The Company’s net working capital days changed from a negative 31 days in 2010 to a negative 26 days in 2011 and to a negative 29 days in 2012. These changes were due to a decrease in average inventory days from 34 days in 2010 to 27 days in 2011 and to 26 days in 2012. These improvements were offset by an increase in trade and other receivables days from 1 day in 2010 to 3 days in 2011 and 2012 (following an increase in the usage of credit cards) and a decrease in trade and other payables days from 67 days in 2010 to 56 days in 2011 and an increase to 58 days in 2012 due to seasonal factors.

Net cash flows used in investing activities

Cash used in investing activities increased from Rp260.5 billion cash outflow in 2011 to a Rp512.8 billion cash outflow in 2012. This increase was primarily due to increased cash outflows for additional rental advances due to the prepayment of rent for the Company’s stores. There were also increases in cash outflows for the acquisition of fixed assets due to the opening of 13 new stores, the refurbishment of 15 existing stores, investment in IT and other capital expenditures associated with improvements to the Company headquarters and the distribution centre. These increases were partially offset by a decrease in advance payments for the purchase of fixed assets.

Cash used in investing activities decreased from a cash outflow of Rp7,918.4 billion in 2010 to a cash outflow of Rp260.5 billion in 2011. Cash used in investing activities in 2010 primarily comprised a Rp7,791.3 billion investment in the shares of MDS by MI made in 2010 as part of the acquisition. Apart from the Acquisition, cash used in investing activities in 2010 comprised Rp85.1 billion for the acquisition of fixed assets, which increased to Rp139.9 billion in 2011, and an advance payments for fixed assets of Rp27.3 billion in 2010 which increased to Rp95.7 billion in 2011 due to the opening of nine new stores, the refurbishment of 13 existing stores, investment in IT and other capital expenditures associated with improvements to the Company headquarters and the distribution centre.

Net cash flows generated from and used in financing activities

Cash outflows used in financing activities were Rp1,004.0 billion in 2012 as compared to Rp1,042.4 billion in 2011. In 2012, the Company had cash inflows of Rp1,176.2 billion representing the proceeds of a draw down on its syndicated loan which it used to repay the balance of Rp1,237.8 billion due on the Vendor Loan. The Company also had cash outflows of Rp616.9 billion for the repayment of bank loans and Rp325.5 billion for the payment of interest and bank charges representing decreases compared to the cash outflows of Rp626.3 billion for the repayment of bank loans and Rp413.6 billion for payment of interest and bank charges in 2011.

Cash inflows generated from financing activities were Rp7,670.0 billion in 2010 as compared to cash outflows from financing activities of Rp1,042.4 billion in 2011. This change was primarily due to cash inflows in 2010 comprising proceeds from the issuance of shares of MI of Rp4,182.8 billion issued in connection with the Acquisition, and proceeds from a syndicated loan of Rp3,108.9 billion and a Rp1,000.0 billion loan from Matahari Pacific to MI, which partially funded MI’s purchase of the Company’s Shares. The loan from Matahari Pacific to MI was transferred to the Company as a consequence of the Merger. In 2011, the Company had cash outflows of Rp626.3 billion for the repayment of a bank loan and Rp413.6 billion for payment of interest and bank charges.

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With effect from 2013, MDS must use 30% of excess cash flow in respect of each financial year to prepay the loans under the Facilities (as defined below).

Liquidity

The Company’s primary source of liquidity for its operations is cash generated by its operating activities. The Company had Rp999.9 billion in cash and cash equivalents as at 31 December 2012. The Company used Rp700.0 billion of that cash to prepay its syndicated loan facilities on 4 March 2013 and drewdown Rp250.0 billion on its revolving credit facility on 5 March 2013.

After taking into account the prepayment of the syndicated loan facilities described above, the Company believes its cash on hand, cash generated from operating activities and revolving credit facilities are sufficient to cover forecast cash requirements comprising the opening of 15 new stores in 2013, the refurbishment of 23 stores in 2013 and other capital expenditure commitments (including IT and maintenance) of approximately Rp60 billion. The Company spends between approximately Rp9.6 billion to Rp14.5 billion (USD$1.0 million to USD$1.5 million) in capital expenditure on the opening of each new store. The Company spends between approximately Rp3.1 billion to Rp6.2 billion (USD$300,000 and USD$600,000) in capital expenditure on the refurbishment of a store.

FINANCIAL INSTRUMENTS

During the period under review, the Company has had a borrowing facility pursuant to the senior facilities agreement dated 5 March 2010 with MAC and ACC (“Senior Facilities Agreement”) with, among others, PT Bank CIMB Niaga Tbk and Standard Chartered Bank, Jakarta Branch as mandated lead arrangers and PT Bank CIMB Niaga Tbk as Facility Agent (the “Facility Agent”). The Senior Facilities Agreement comprises a term loan facility of Rp3,250.0 billion, a term loan facility of Rp1,225.0 billion and a revolving credit facility of Rp250.0 billion which is secured on property and other assets of the Company. The Company also had a Vendor Loan which was repaid in August 2012, as described below.

Senior Facilities Agreement

Overview

The Senior Facilities Agreement was entered into on 5 March 2010 between MDS, MAC and ACC, the mandated lead arrangers and the Facility Agent. It was amended and restated on 26 March 2010 and was further amended and restated pursuant to an amendment and restatement agreement dated 28 June 2012 between, among others, MDS, the Facility Agent and the financial institutions named therein as lenders (the “Lenders”). The Senior Facilities Agreement was amended and restated pursuant to an amendment and restatement agreement dated 1 March 2013 (the “Amendment”).

The facilities available under the Senior Facilities Agreement are as follows:

(a) a term loan facility of Rp3,250.0 billion (“Facility A”) (which was drawn in full on 1 April 2010);

(b) a term loan facility of Rp1,225.0 billion (“Facility B”) (which was drawn in full on 7 August 2012); and

(c) a revolving credit facility of Rp250.0 billion (which was drawn in full on 5 March 2013) (“Revolving Facility”), together, the “Facilities”. The Revolving Facility may be utilised in the form of a letter of credit.

Maturity and interest

On 28 February 2013, an aggregate loan amount of Rp3,069.3 billion was outstanding under the Facilities. The outstanding loan amount was reduced by the Rp700.0 billion that was repaid on 4 March 2013 and increased by the Rp250.0 billion that was drawn on the revolving credit facility on 5 March 2013.

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The maturity date for the Facilities is 31 December 2016, at which point all outstanding loans under the Facilities must be repaid in full.

The rate of interest payable in respect of each of Facility A, Facility B and Revolving Facility loan is 4.75% per annum plus JIBOR.

Information Undertakings

Until the Facilities have been repaid in full, MDS is under an obligation at certain times to supply to the Facility Agent for distribution to the Lenders certain financial statements and financial performance calculations. These calculations set out details of compliance with certain financial covenants as set out below. MDS is also obliged to deliver to the Lenders a budget in respect of the next financial year as soon as it becomes available (but in any event, no later than the start of such financial year). Each budget shall include a projected consolidated cash flow statement, profit and loss statement and balance sheet for MDS and any subsidiaries of MDS which may exist from time to time (the “MDS group”) as at the end of that financial year. It shall also include projected levels of the financial covenants as set out below and a comparison of the budget performance as against actual performance, explaining any material deviations. Additionally, the senior management shall, after delivery of the financial statements and following a request from the Facility Agent, give one presentation in each financial year to the Lenders about the ongoing business and financial performance of the MDS group.

Pursuant to the Senior Facilities Agreement, MDS must deliver to the Facility Agent copies of all public disclosures and announcements dispatched by MDS to its shareholders. MDS is also under an obligation to provide other miscellaneous information to the Facility Agent, including details of any litigation, details of any material labour dispute, any change in structure of the MDS group and the details of any actual or threatened suspension or cessation of all material parts of the business of MDS.

General Undertakings

Following the Amendment, the Senior Facilities Agreement will contain covenants customary for facilities of this nature restricting the ability of MDS to, among other things, make substantial changes to the business of MDS, enter into any amalgamation, demerger or merger, consolidation or corporate reconstruction, invest in or acquire any shares issued by, or any interest in, any person or make a capital investment in any person, enter into, invest in or acquire any shares, stocks, securities or other interests in any joint venture, or provide security for the obligations of any joint venture, create or permit to subsist any security over its assets, dispose of any asset, be a creditor in respect of, or incur, any financial indebtedness or guarantee any liability or obligation of any person. In each case, there are permitted exceptions to these restrictions. MDS will also be under customary positive obligations for facilities of this nature to, among other things, ensure that insurance is maintained for the group, intellectual property is safeguarded/maintained and all leases are complied with.

Financial Covenants

MDS is subject to restrictive covenants requiring it to ensure that, on each test date (i.e. each financial half year) in respect of the previous 12 months:

(a) the ratio of consolidated cash flow to consolidated debt service is not less than 1.4:1; and

(b) the ratio of total debt to the total consolidated operating profit (as adjusted in accordance with the Senior Facilities Agreement) is not less than 3.25:1 (for the test date 31 December 2012) or 2.50:1 (for each test thereafter).

Dividend Restrictions

The Senior Facilities Agreement contains no restrictions on MDS from making distributions to its shareholders.

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Compliance with Covenants

The Directors confirm as at the date of this document that all amounts of accrued interest and principal have been paid on schedule and that there has been no material non-compliance with the covenants contained in the Senior Facilities Agreement.

Any breach of the covenants could, subject to notice and applicable grace periods, result in an event of default under the Senior Facilities Agreement which would permit the Lenders to accelerate any and all loans outstanding under the Facilities and take other enforcement action including enforcing security.

Mandatory and Voluntary Prepayments

Following the Amendment, MDS must use a certain percentage of excess cash flow to prepay the loans under the Facilities, being 30% in respect of each financial year.

Loans under the Facilities may be cancelled and prepaid in whole or in part (subject to certain minimum amounts if prepaid in part) before the maturity date. Any such prepaid amount will not be available for redrawing. The Senior Facilities Agreement requires that MDS make a mandatory prepayment of the loans under the Facilities (together with any interest accrued thereon) upon, among others:

(a) change of control, which will occur if (i) any person or group of persons acting in concert (other than CVC Asia Pacific Limited (or its affiliates) or the funds it advises) gains (A) direct or indirect ownership of 50% or more of the share capital, voting rights or similar rights of ownership, or (B) the power to, directly or indirectly, direct the management and the policies of a person whether through the ownership of share capital, voting rights, by contract or otherwise, of MDS, or (ii) a Lender reasonably determines that it is in violation of such Lender’s legal lending limit (Batas Maksimum Pemberian Kredit) as a result of its participation in the Facilities;

(b) receipt of certain insurance proceeds (up to the amount of such proceeds only); and

(c) net sale proceeds from certain disposals of assets and which have not been applied or committed to be reinvested in the MDS group (up to the amount of such proceeds only).

In addition, the Revolving Facility must be prepaid in full (together with any interest accrued thereon) if Facility A and Facility B are repaid or prepaid in full.

Events of Default

The Senior Facilities Agreement contains certain customary events of default including, but not limited to, non- payment of principal, interest, fees or other amounts when due under the Senior Facilities Agreement, breach of financial covenants or breach of any of other obligations under the Senior Facilities Agreement, failure of any representation or warranty to be true in all material respects when made or deemed to be made, cross default and cross acceleration in relation to any indebtedness which is greater than Rp50.0 billion (or its equivalent in other currencies), insolvency and insolvency proceedings, audit qualification, the occurrence of a material adverse effect under the terms of the Senior Facilities Agreement, cessation of business, expropriation or material litigation. Upon the occurrence of an event of default, subject to applicable grace periods, the Facility Agent may, and upon the instructions of two thirds of the Lenders shall, accelerate any and all loans outstanding under the Facilities and instruct the security agent to take other enforcement action including enforcing the security.

Security and Guarantees

The Facilities are provided to MDS by the Lenders on a secured basis. Following the Amendment, collateral for the Facilities consists of security over certain assets of the Borrower including, but not limited to, bank accounts, intellectual property, receivables, fixed assets and real estate.

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Interest Rate Swap

On 11 August 2010, the Company entered into an interest rate swap transaction with Standard Chartered Bank (the “Swap”) to satisfy the requirement under the Senior Facilities Agreement to hedge at least 50% of the Senior Facilities Agreement from interest rate fluctuations. Under the terms of the Swap, MDS pays a fixed interest of 8.42% on the relevant notional amount and receives a floating interest rate on the same notional amount from Standard Chartered Bank. The Company used the cash flows that it received under the Swap (together with the applicable margin amount) to partly satisfy its interest payment obligations under the Senior Facilities Agreement.

The Swap will terminate on 30 June 2013 and the Company does not intend to, nor is required to, enter into another interest rate swap transaction upon the termination of the Swap.

Vendor Loan

In April 2010, PT Matahari Pacific lent Rp1,000.0 billion to MI, which was used to partially finance MI’s acquisition of Shares in the Company. The Vendor Loan had an interest rate of 13% per annum. The finance cost of the Vendor Loan was Rp99.3 billion in 2010, Rp140.1 billion in 2011 and Rp90.6 billion in 2012. The Vendor Loan was repaid in full in August 2012.

COMMITMENTS AND CONTINGENT LIABILITIES

Commitments

The Company has various contractual obligations and commercial commitments to make future payments, including bank borrowings and rent. The table below analyses the Company’s financial liabilities. The amounts disclosed in the table are calculated in reference to undiscounted cash flows amounts.

The Company’s other financial liabilities, excluding borrowings, are due in less than 3 months as of 31 December 2012.

Between Less three Between than months Between two and three and one one and five months year two years years Total (Rp billions) Bank loans ...... 5.9 478.0 744.6 1,730.6 2,959.1

The Company also has lease commitments. These estimated total lease commitments as at 31 December 2012 are Rp365.7 billion for leases of ten to eleven years. See Note 26c in the financial statements in the F-pages. The Company estimates these obligations, at 31 December 2012, were Rp0.3 billion due in less than three months, Rp9.9 billion due between three months and one year, Rp23.7 billion due between one year and two years and Rp331.7 billion due in 2015 or in later years.

As at the Latest Practicable Date, the Company has also signed nine memorandum of understanding for opening new stores in 2013 and two memorandum of understanding for opening new stores in 2014 to 2015. The stores are located in several locations in Indonesia and are expected to start commercial operations by the end of 2013.

Contingent Liabilities

The Company had no significant contingent liabilities as at 31 December 2010, 2011 and 2012.

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CAPITAL EXPENDITURE

The following table sets forth the Company’s capital project commitments, which are defined as the actual cost incurred plus the projected cost expected to complete approved projects, in the periods indicated:

Years ended 31 December 2010 2011 2012 (Rp billions) New stores(1) ...... 80.0 108.9 162.7 Refurbishments(2) ...... 65.8 76.1 98.0 IT & maintenance...... 88.9 51.7 52.3 Total ...... 234.7 236.7 313.0

(1) The Company opened 7, 9 and 13 new stores in 2010, 2011 and 2012, respectively (2) The Company refurbished 16, 13 and 15 stores in 2010, 2011 and 2012, respectively.

The Company spends between approximately Rp9.6 billion to 14.5 billion (USD $1.0 million to $1.5 million) in capital expenditure on the opening of each new store. The Company spends between approximately Rp3.1 billion to Rp6.2 billion (USD300,000 and USD600,000) in capital expenditure on the refurbishment of a store.

As at 31 December 2012, the Company had commitments to purchase fixed assets, comprising the fixtures for new and refurbished stores and IT equipment, amounting to Rp64.0 billion. In 2011 and 2010, the Company had no significant capital commitments.

CAPITALISATION AND INDEBTEDNESS

For details of the Company’s capitalisation and indebtedness see Section 8 – “Capitalisation and Indebtedness”

DIVIDEND POLICY

Effect of the negative equity position on the Company’s ability to pay dividends

Following the merger between MDS and MI in 2011 (see Section 15 – “Corporate and Shareholding Structure and Reorganisations”), the Company has been in a situation of negative equity (i.e. its liabilities exceed its assets), which impacts the Company’s ability to pay dividends, in particular interim dividends. As at 31 December 2012, the amount of the Company’s negative equity was Rp1,931.5 billion. However, the Company has booked positive profit balances in its 2011 and 2012 audited financial statements.

The Company has been advised by its Indonesian counsel that its negative equity situation does not prohibit it from distributing a final dividend to its Shareholders so long as it has booked a positive profit balance at the close of the relevant financial year and it has set aside part of its positive profit balance for its mandatory reserves until the amount of its mandatory reserves reaches at least 20% of its total issued and paid up capital.

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Management do not believe the negative equity position has any other material impact on its business or operations.

Dividend payments

The Company did not make any dividend payments in 2010 and 2012.

In 2011, based on the net profits achieved in 2010 and a dividend pay-out ratio of 21.6%, the Company paid dividends in the aggregate total amount of Rp135.0 billion at an equivalent of Rp46.25 per Share. Payment of these dividends was made in two stages – on 30 June 2011 and 15 September 2011. On 30 June 2011, the Company paid dividends amounting to Rp94.1 billion at Rp32.25 per Share. On 15 September 2011, the Company paid dividends amounting to Rp40.9 billion at Rp14.00 per Share.

The Company intends to declare a final dividend of between 40% and 50% of net profits in respect of its 2013 financial year, subject to approval at a general meeting of Shareholders based on a recommendation from the Board of Directors. If approved, this dividend will be paid in 2014. The annual general meeting of Shareholders is expected to be held at the latest in June of each year. If this dividend is approved by Shareholders at the AGM, Shareholders who purchased Offer Shares in the Offering and remain Shareholders on the relevant record date will receive this dividend in full. The Company expects the dividends in respect of its 2014 financial year and subsequent years to be in a similar range. The Company does not intend to declare a dividend in respect of the 2012 financial year. Once the Company is able to pay interim dividends (see “Interim Dividends” above) it will consider the merits of doing so.

For details of the Company’s dividend policy please see Section 6 – “Dividend Policy”.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk

The Company is exposed to interest rate risk arising from the floating rates of its bank loans. An increase in interest rates would increase borrowing costs and adversely affect the profitability of the Company. Any significant increase in interest rates, especially for a prolonged period, could have a material and adverse effect on the Company’s business, financial position, result of operations and prospects.

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This exposure is managed mainly through the interest rate swap (described above) which has the economic effect of converting a certain portion of the Company’s loans from floating rate to fixed rate (see Note 30(i)(a) of the financial statements in the F-pages and “– Interest Rate Swap”. Interest rate exposure is monitored to minimise any negative impact to the Company.

The Company’s borrowings profile after taking into account hedging transactions is as follows:

2010 2011 2012 (Rp billions) Fixed interest rates borrowing ...... 1,584.4 1,472.3 1,235.0 Floating interest rates borrowings ...... 1,503.1 988.9 1,834.3 Total ...... 3,087.5 2,461.2 3,069.3

As at 31 December 2012, if interest rates on Rupiah-denominated borrowings had been 1% higher/lower with all other variables held constant, post–tax profit for the year would have been Rp13.8 billion lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

Foreign exchange risk

The Company has no significant foreign exchange risk as the Company’s transactions are mostly in Rupiah. The Company’s treasury policies are designed to mitigate the financial impact of fluctuations in foreign exchange rates and to minimise potential adverse effects on the Company’s financial risk.

Credit Risk

The Company is exposed to credit risk primarily from deposits with banks. The Company manages its credit risk exposure from its deposits with banks by only using banks with good ratings. There is no significant credit risk from trade receivables, as they only represent credit card receivables from banks that are usually settled within two or three days of the transaction date.

A substantial majority of customer purchases are paid for in cash.

Liquidity Risk

The Company manages its liquidity risk by continuously monitoring rolling forecasts of its liquidity requirements and actual cash flow and the due date of financial assets and liabilities. The Company also prepares regular cash flow projections to monitor the payment of maturity loan principals and interest.

TAXATION

The effective tax rates during the period under review were 77.4%, 36.7% and 33.5%. This is mainly due to non- tax deductible expenses of Rp605.3 billion, Rp583.4 billion and Rp420.7 billion in 2010, 2011 and 2012. Non- deductible tax expenses include mainly interest expense from the Company’s bank loans and Vendor Loan. See “–Financial Instruments”. The increase in profit before tax and the decrease in finance costs decreases the impact of non-tax deductible expenses related to the Acquisition on the effective tax rate. Further, because the proceeds of the Company’s bank loans and the Vendor loan funded the Acquisition, the expenses associated with these loans are not tax deductible. The effective tax rate decreased from 77.4% in 2010 based on the income tax expense and profit before tax figures in the historical audited financial information (or from 91.9% in 2010 based on pro forma income tax expense and profit before income tax figures) to 36.7% in 2011 mainly due to the increase in profit before tax from Rp277.2 billion (not including pro forma adjustments) in 2010 to Rp735.6 billion in 2011. The effective tax rate decreased further to 33.5% in 2012 mainly due to the repayment of the Vendor Loan and prepayments of principal on bank loans which decreased the Company’s non-deductible interest expense in 2012.

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The Company expects that its effective tax rate will further decrease as the Company continues to repay debt incurred as part of the Acquisition resulting in reductions in non-deductible interest expenses. See Note 10c of the financial statements in the F-pages.

The Company has received a notice, dated 6 February 2013, from the Ministry of Finance of the Republic of Indonesia, Director General of Tax, Director of Inspection and Collection informing the Company that it will be the subject of a tax audit of its compliance with its corporate income tax, withholding income tax and value added tax obligations for fiscal years 2009, 2010 and 2011. The Company is cooperating with the audit process which is expected to conclude no later than 6 August 2013. Upon completion, if the Ministry of Finance were to conclude that the Company had underpaid with respect to any of its tax obligations, the Company may be assessed additional tax and/or penalties for such non-compliance. The penalties for underpayment of tax are 2% of the underpaid amount per month from the point in time of the underpayment up to the date of payment of the overdue tax, subject to a maximum of 24 months.

The Company has an internal tax department and conducts internal reviews to ensure that it complies with applicable Indonesian tax rules and regulations. The Company also consults with external tax advisers. Furthermore, during the Merger and Acquisition, the Company engaged with local tax authorities to ensure its compliance with all applicable tax requirements.

Under Indonesian tax rules and regulations, companies are entitled to a lower corporate tax rate of 20% provided that: (i) at least 40% or more of the company’s total paid up share capital is owned by the public; (ii) the company has at least 300 shareholders who each own less than 5% of the company’s total paid up share capital; and (iii) criteria (i) and (ii) above are met for a period of more than six months (183 calendar days) during the relevant fiscal year. Following the Offering, the Company expects to be eligible for a reduction in its corporate tax rate from 25% to 20%. The Company expects this reduced tax rate to apply retrospectively for the entirety of 2013.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Critical accounting policies are those policies that require the application of Management’s most challenging, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgements and uncertainties that are sufficiently sensitive to result in materially different results under different assumptions and conditions. The Directors believe that the Company’s most critical accounting policies are those described below.

A detailed description of certain of the main accounting policies used in preparing the Company’s financial statements is set forth in Note 2 of the financial statements in the F-pages.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are disclosed below.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next 12 months are addressed below.

Employee benefits

Indonesian regulation requires companies to provide a lump-sum payment to employees upon retirement. If an employee leaves the Company, prior to retirement, that obligation terminates. The Company employs an actuary to value this obligation and accounts for this obligation as an unfunded obligation on its balance sheet.

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The employee benefits obligations recognised in the statements of financial position in respect to retirement benefits are the present value of the defined benefit obligation at the statements of financial position date, and adjusted by unrecognised actuarial gains or losses and unrecognised past service costs. The defined benefit obligation is calculated by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates at the statements of financial position date of long term Indonesian government bonds that are denominated in Rupiah, in which the benefits will be paid, and that have terms to maturity similar to the related retirement benefits liability.

Past-service costs are recognised in statements of comprehensive income, unless the changes to the retirement plan are conditional on the employees remaining in service for a specified period of time. In this case, the past- service costs are amortised on a straight-line basis over that period.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the 10% of the present value of the defined benefit obligations are charged or credited to statements of comprehensive income over the employees’ expected average remaining working lives.

As at 31 December 2012, were the discount rate used to differ by 1% from management’s estimates, the carrying amount of employee benefits obligations would be an estimated Rp36.8 billion lower or Rp43.0 billion higher.

Deferred income

The Company made a deferred income estimation in connection with loyalty point cards owned by customers and issued by Company amounting to Rp84.4 billion as at 31 December 2012 (31 December 2011: Rp93.4 billion and 31 December 2010: Rp60.5 billion). The loyalty cards allow the customer to earn points from each purchase transaction in stores. These points can be redeemed for a coupon with a monetary value.

The calculation of this deferred income involves estimating the redemption rate of the coupons arising from point conversion. Uncertainty associated with these factors may result in the ultimate realisable amount being different from the reported carrying amount of deferred income.

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STRENGTHS

MDS is the largest and fastest growing department store operator in Indonesia. Based on Euromonitor estimates, MDS had the highest retail value sales per square metre of retail space among department store operators in Indonesia in 2011. MDS’ competitive business model uniquely positions it to take advantage of the growth opportunities in the significantly under-penetrated Indonesian department store segment. Based on Euromonitor estimates, Indonesia’s department store penetration rate is 2.7 stores per million people in 2011, as compared to an average of 4.8 stores per million people for Thailand, Singapore, Malaysia, Philippines, and China. Euromonitor expects the value of Indonesian mixed retailers’ (which almost entirely consists of department store retailers) retail sales to grow at a CAGR of 7.5% from 2011 to 2016. Management believe that MDS’ market leading position and competitive business model are difficult to replicate given its following key strengths:

LEADING RETAIL BRAND COMPLEMENTED BY STRONG PRIVATE LABELS: Indonesia’s largest department store operator with a nation-wide retail brand with a heritage of more than 50 years, and a strong suite of private label brands

MDS is the largest department store operator (based on retail value sales) in Indonesia, having a market share of 31.6% of the department store retail sector in 2011, according to Euromonitor, ahead of the next two largest department store operators which have market share of 22.5% (Ramayana) and 7.7% (Mitra Adiperkasa), respectively. No other department store operators had market share above 5% in 2011.

MDS opened its first store in October 1958 and pioneered the modern department store concept in Indonesia, having opened the country’s first modern department store in 1972. The Company’s long operating history of more than five decades has helped to define the Matahari department store brand as a nation-wide icon in the Indonesian department store industry.

Management believe that the Matahari department store brand is a well-recognised and trusted brand in Indonesia, viewed by customers as a brand that is associated with fashionable and quality merchandise at affordable prices. According to an independent consumer survey by MarkPlus Insight in 2012 as commissioned by MDS, MDS is and has been by far the most visited department store chain in Indonesia for the last five years. The success of the MCC loyalty programme with more than 2.4 million active members as at 31 December 2012, which Management believe is one of the largest loyalty card programmes in the country, is a testimony of the Company’s market leadership and brand strength.

The Company has a strong suite of private label brands. MDS’ private label brands such as Nevada, Cole, Little M and Connexion were among the top ten most popular “fashionable affordable clothing brands” in Indonesia, with Nevada ranking number one according to a consumer survey for unaided brand awareness conducted in 2012 by MarkPlus Insight (ahead of brands such as Polo and Levi’s). In addition, over 98% of respondents in the same survey agreed that the MDS private label brands offer quality products at competitive prices, and more than 90% viewed MDS private label brands as affordable, inspirational and fashionable. MDS’ private label brands are important to its customers who demand quality products and fashionable merchandise at affordable prices, and are a critical differentiator of MDS’ product offering. The Company’s private label brands are sold exclusively at MDS’ stores, and Management believe that these brands play a key role in enabling the Company to differentiate itself from its competitors.

Management believe that the strength of the Matahari department store brand and its exclusive private label brands make MDS’ stores an aspirational shopping destination for its customers.

TARGETING LARGE AND GROWING MIDDLE-INCOME SEGMENT: Dominant market position in the large and growing middle-income segment in Indonesia

Department store operators in Indonesia can be classified by their target consumer segment. For example, Ramayana caters to the middle lower and lower income segment whilst Mitra Adiperkasa typically targets affluent customers in major cities. According to Management, MDS is the only major department store operator in Indonesia which focuses on the middle-income segment.

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Management believe that MDS has built a deep understanding of the middle-income segment, and that its strength to successfully serve this segment lies in its ability to adapt its merchandise mix to different regional tastes, and to offer a broad selection of fashionable and quality merchandise at affordable prices supported by strong supplier relationships built over a long period of time. Based on this customer focus and understanding, Management believe that the Company is strategically well-positioned relative to competitors to continue to capitalise on the anticipated strong growth from consumer spending of Indonesia’s large and growing middle- income segment.

Indonesia has the world’s fourth largest population, and has witnessed a rapid emergence of the middle-income segment. According to 2010 data from the Central Bureau of Statistics on Indonesian population segmentation by consumer expenditure per capita per month, Management estimate that the Indonesian middle-income population (defined by Management as people with a consumer expenditure of between Rp0.7 million – 4.5 million per capita, per month) comprised 125 million people in 2010, or 52.4% of Indonesia’s total population. Management also anticipate that persons in the Indonesian lower-income population segment (defined by Management as those with consumer expenditure of less than Rp0.7 million per capital per month), which comprised 106 million people in 2010, will continue to shift into the middle-income segment. According to Euromonitor, Indonesian consumer expenditure is expected to grow at a CAGR of 5.3% between 2011 and 2016, reflecting continuing growth in purchasing power due to rising disposable income, economic growth and increasing urbanisation. As people move into the middle-income segment and their disposable income increases, they aspire to purchase more branded products at affordable prices, which Management believe increases demand for the Company’s products. The Company targets consumers in the middle-income segment, and Management believe that the Company’s range of merchandise is tailored to appeal to the tastes of all members of a typical middle-income Indonesian family in a single store.

LARGEST NATIONWIDE STORE NETWORK SUPPORTED BY EFFICIENT LOGISTICS INFRASTRUCTURE: Largest nationwide store footprint and efficient logistics positions Company to benefit from growth opportunities across Indonesia

MDS has the most extensive department store network in Indonesia with 116 stores in over 50 cities across Indonesia, covering a total store space of approximately 750,000 square metres as at the Latest Practicable Date.

MDS’ nationwide store network is supported by an efficient infrastructure which consists of extensive distribution and logistics capabilities, including its own fleet of vehicles, contract transporters, as well as freight forwarders to transport its merchandise directly to its stores, including those in the East Indonesian regions of Sulawesi, Ambon, Kalimantan and Batam. As at 31 December 2012, the efficiency of its logistics operations is recognised by approximately 180 consignment vendors who use the Company’s services to transport their own merchandise and pay MDS a service fee, thereby reducing MDS’ net distribution cost. Management believe that MDS’ logistics operations, which are highly complex within the expansive Indonesian archipelago, are a key competitive advantage for MDS which would be difficult for smaller competitors and new entrants to replicate over the medium term.

The Company’s geographically diversified network, supported by a logistics infrastructure with short lead times, enables it to supply its merchandise nationwide in a cost-effective manner. This provides MDS with the flexibility to consider a wide range of suitable sites and to capture growth in metropolitan areas, as well as through further penetration into large-middleweight cities and mid-sized middleweight cities across Indonesia. According to McKinsey Global Institute, the fastest growing cities in Indonesia will be the large middleweight cities (defined as cities with a population of between 5 to 10 million) and mid-size middleweight cities (defined as cities with a population of between 2 to 5 million) which it forecasts will grow at real GDP CAGR of 9.1% and 6.9% respectively from 2010 to 2030, subject to sufficient investment in urban infrastructure such as housing, water, energy and transportation, as well as continued improvement in productivity in Indonesia. Rapid urbanisation across the country is driving growth of mid-sized middleweight and large-middleweight cities (with more than five million inhabitants), which are projected to continue to grow faster than Jakarta between 2010 and 2030F at GDP CAGR’s of 6.9% and 9.1% respectively, according to the McKinsey Global Institute.

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HIGHLY SCALABLE BUSINESS MODEL FOR RAPID GROWTH: Proven business model and operating expertise have led to consistent profitability across store base, and enables the Company to expand rapidly and profitably

MDS operates an efficient and competitive business model with growing revenue from new store openings, sales growth from existing stores, and expanding margins driven by cost control initiatives and productivity enhancements. MDS has grown its Adjusted EBITDA margins from 15.0% in 2010 to 16.7% in 2012. The Company’s proven business model and operating expertise have led to a track record of operating profitable stores across its whole range of store sizes and geographic locations in Indonesia.

Management believe that MDS’ strong Matahari department store brand, scale and market leading position make it one of the anchor tenants of choice for real estate developers. MDS has longstanding relationships with leading real estate developers including Lippo Karawaci, and is supported by a dedicated real estate team which actively engages with developers to track site opportunities. This dedicated team enables the Company to secure prime locations with developers, usually based on long-term leases as anchor tenants on favourable terms. The Company’s “lease-only” strategy reduces investments in fixed assets, whilst MDS’ experience in rolling out the Matahari department store concept limits fit-out time and capital expenditure requirements, resulting in a high degree of speed in bringing stores to market and a fast payback on investment.

In addition, MDS has established a management information system, a nationwide disaster recovery centre and sophisticated merchandise, accounting and warehouse management systems which are scalable to support significant further expansion of the Company’s business.

These strategies have increased MDS’ operating leverage and have resulted in a high degree of cash conversion and return on assets, enabling the Company to continue to expand rapidly and profitably. The Company has outgrown other department store operators in Indonesia in terms of number of store openings, opening more stores between 2009 and 2011 than any of its competitors, according to Euromonitor. Having opened five stores in 2009, seven stores in 2010, nine stores in 2011 and 13 stores in 2012, Management expects to continue its trend of store expansion by opening an additional 15 stores in 2013.

CUSTOMER DRIVEN MERCHANDISE MIX: MDS tailors its merchandise mix to customer preferences on a store-by-store basis

The Company’s strategy is to provide its customers with good value, by offering a large selection of fashionable and quality merchandise at affordable prices. The Company tailors its merchandise mix (including its mix between DP Goods and Consignment Goods) for each store in accordance with the store’s local target market and its judgement of appropriate price points for that market, in order to maximise each store’s profitability. The Company’s flexibility to customise its product offering on a store-by-store basis is due to factors such as its large and diverse base of both consignment vendors and direct-purchase suppliers, understanding of its customers and local markets and similar Effective Contribution Margins across both Consignment Goods and DP Goods.

During its long history of operations, MDS has built longstanding relationships with over 1,200 consignment vendors and direct-purchase suppliers. Management believe that the strength of its brand and market leadership makes MDS a partner of choice for both consignment vendors and direct-purchase suppliers. The majority of the Company’s Gross Sales are realised through consignment vendors which serves to reduce inventory investment, employment costs and fashion risk, broaden the range of merchandise, and further enhance MDS’ brand image and the attractiveness of its stores, thereby increasing customer traffic. Longstanding relationships with consignment vendors and direct-purchase suppliers have allowed MDS to benefit from favourable pricing terms, and priority in terms of timing and volume of merchandise supplied.

Approximately 90% of MDS’ merchandise is sourced locally, allowing MDS to avoid delays associated with the import of goods, respond quickly to changing inventory needs and fashion trends, as well as to limit its exposure to foreign exchange risks and import taxes. As the world’s largest archipelago, Indonesia exhibits strong regional variations in consumption patterns. MDS closely monitor sales patterns per store and its MCC data base of over 2.4 million customers provides further understanding of customer purchasing habits.

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OPTIMISED STORE OPERATIONS DRIVING AN INSPIRING AND ATTRACTIVE SHOPPING EXPERIENCE: High store productivity driven through optimised store presentation, efficient operations and frequent promotions

MDS’ strategy is to create an attractive shopping destination that entices its customers and maximises sales productivity through optimised store design, supported by aggressive promotions of its merchandise.

Management believe that the format and look of each store, along with its merchandise presentations are critical for enhancing store productivity and that store merchandise presentations are effective in communicating information on price, current trends and value whilst also encouraging impulse purchases. The Company’s ‘centre core’ initiative is an example of a ‘high impact’ area which Management believe has reinforced MDS’ reputation as a ‘destination’ for cosmetics, shoes, handbags and accessories, and has led to increased traffic at its stores. MDS constantly seeks to improve its store designs, and to optimise product space allocation to enhance the overall shopping experience of its customers and increase store productivity. The Company has an ongoing programme of store refurbishment to ensure its stores offer a modern and customer-friendly environment.

Management believe that MDS has one of the most active marketing strategies amongst its competitors in Indonesia and that its promotional campaigns have successfully established MDS’ image as a retail market leader which offers value for money to customers. MDS seeks to connect its advertising activities with its in-store advertising through the consistent use of strong visual cues designed to encourage the Company’s customers to purchase its merchandise. Management believe that active brand management through continuous investments in advertising and marketing campaigns and visual merchandising further strengthen the value of MDS’ private label brands and drive customers to its stores.

DEDICATED EMPLOYEES AND EXPERIENCED MANAGEMENT: Well-trained and dedicated employees supported by a management team that combines global retail experience with local execution strength

MDS is managed by a team of highly experienced and competent retail industry veterans many of whom have worked with leading retailers globally such as Macy’s, SteinMart, Debenhams, and JC Penney. Members of the Board of Management have retail experience ranging from 17 to 35 years and, collectively, they reflect a combination of in-depth understanding of department store retailing and local execution strength.

The management team has been instrumental in the development, execution and management of an efficient and scalable platform to drive sustainable growth of the business. Under their leadership, the Company has accelerated its store expansion, implemented many global best practices and international standards of operational excellence and established three additional governance committees, namely the real estate committee, the marketing committee and the risk management committee. These committees provide oversight, supervision and decision making capabilities to ensure that the policies of the Company are correctly applied.

Furthermore, the management team has established a customer-oriented corporate culture with motivated and well-trained employees and an active talent management programme. The Company believes that the senior management team has been critical in building a strong foundation to maintain and enhance MDS’ long term competitiveness.

The Company also places strong emphasis on actively developing staff with leadership potential to support its store opening plans and ensures that new stores are staffed with experienced store managers. In 2012, all of the Company’s new stores had store managers with prior experience and training within the Company’s existing store network.

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STRATEGIES

MDS’ principal long-term goal is to further strengthen and consolidate its position as the leading department store operator in Indonesia. The Company aims to achieve this goal by implementing the following strategies:

Continuous and rapid store expansion across Indonesia

MDS intends to continue to capitalise on its strong brand and market leadership by further increasing its market share through rapid store expansion, to capture growth from consumer spending of Indonesia’s large and growing middle-income segment. The breadth of the Company’s existing logistics network and its ability to vary each store’s merchandise mix provides MDS with flexibility in considering new store sites across Indonesia.

MDS continues to build its pipeline of store openings and currently plans to open approximately 15 stores a year in the period from 2013 to 2015. Including the 15 stores that it expects to open in 2013, MDS has identified more than 50 possible sites for stores (as at the Latest Practicable Date) and is constantly evaluating site possibilities to increase the number of sites which may lead to store openings in accordance with its expansion plan. The Company plans to further grow its network both in cities where it has an existing presence and in new locations across Indonesia, particularly in underserved high growth regions outside of Greater Jakarta. In 2012, the Company’s annual productivity (based on annualised average of Gross Sales per square metre of Retail Space) for comparable stores was the highest outside Java. Productivity for stores outside Java, and for stores within Java (but outside Greater Jakarta) were 21% and 5.9%, respectively, higher than that of productivity for stores within Greater Jakarta.

MDS typically opens 5,000 - 9,000 square metre sized stores in new modern shopping centres and retail malls, and will continue to focus on opening new stores in keystone developments to take advantage of higher customer traffic. MDS’ dedicated real estate team actively engages with mall developers to track site opportunities across Indonesia and assess the viability of each potential new store. Selection criteria include: the size of the catchment area, population density, disposable per capita income of the total target market, expected rental costs, expected profitability and financial returns and competition from other retailers in the surrounding area.

Given the Company’s track record of expansion and long-term relationships with real estate developers, Management is confident in its ability to implement its current expansion plan, subject to the availability of store locations and the timely completion of shopping malls by developers.

Further increasing store productivity

MDS intends to continue to drive customer traffic and sales productivity through a number of initiatives, including the following:

Š Strengthen customers’ perception of receiving value for money through regular promotions focused advertising and marketing campaigns conducted through a variety of media including its website, television and radio, with a particular focus on print advertising. MDS actively markets its stores during “major events” such as new store openings, anniversaries, holidays, and ‘back to school’. MDS also engages in selective marketing which involves very low pricing on items that is aimed at attracting significant customer numbers to its stores.

Š Continue to review each store’s refurbishment needs on an annual basis to address the changing needs and preferences of MDS’ customers, enhance their overall shopping experience and further strengthen the Matahari department store brand. Store refurbishment initiatives are continuously updated to current international best practices and include installing or improving lighting, product displays, signage, new fitting rooms, wider aisles and more modern fixtures, with a particular focus on improving inventory selection without affecting the store’s feeling of space.

Š Upgrading the presentation and range of merchandise in the ‘centre core’ of its department stores, to reinforce MDS’ reputation as a ‘destination’ for shoes, handbags and accessories.

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Š Improve product space allocation through initiatives such as the implementation of high impact key item presentations, for example, establishing a ‘Denim Bar’ in relation to denim jeans and shorts, as well as having a dedicated section in-store for Nevada, the Company’s most popular private label brand and the most popular “fashionable affordable clothing brand” in Indonesia according to a consumer survey conducted in 2012 by Markplus Insight.

Š Consistent and proper implementation of store merchandise presentations and associated visual merchandising to effectively communicate price information, trends and value, whilst encouraging impulse purchases.

Š Focus on improving product offerings in the following segments: (i) merchandise for young customers which, in line with Indonesia’s age demographics, generated approximately 40% of Gross Sales between 2010 and 2012; (ii) shoes, its highest selling and fastest growing product category; and (iii) handbags and cosmetics to further establish MDS as a shopping destination.

Š Tailor the Company’s merchandise mix for each store in order to vary the average price points of merchandise sold at each store in accordance with its local target market.

Š Leverage on the strengths of its exclusive private label brands by offering of new product lines under MDS’ most popular private label brands such as Nevada, and to assign additional dedicated sections for top performing brands. In addition, MDS will continue to develop its private label brands.

Š Grow the Company’s MCC card members base, which has an average transaction value that is approximately 65% larger than non-MCC card members in 2012.

Continued focus on operational efficiency and improved asset utilisation

Continued focus on enhancing operational efficiencies, stringent cost control and improving asset utilisation will enable MDS to deliver on its expansion plans and further improve profitability. MDS plans to achieve this through, amongst others, the following:

Š Further refine its MCC data mining capabilities so as to obtain valuable insight from its database of over 2.4 million members in respect of strategic decisions regarding: (i) the merchandise mix of a store; (ii) pricing; (iii) new store opportunities, locations and sizes; (iv) in-store merchandising and display strategies; and (v) advertising and promotional programmes.

Š Continued optimisation of consignment vendor selection and space allocation to drive a significant part of sales and growth, reducing payroll and working capital costs, as well as fit-out expenses, distribution and warehousing costs which are borne by consignment vendors.

Š Increased automation and continued refinement of MDS’ centralised procurement system.

Š Continued optimisation of distribution logistics through MDS’ centralised distribution centre which operates as a “flow-through” facility, delivering goods on a “just-in-time” basis, reducing lead times, maximises efficiency and reduces costs. The Company further reduces the net costs of its logistics operations by providing logistical services to certain of its consignment vendors.

Š Continued focus on active inventory management through computerised inventory controls and the monitoring of inventory levels by in-store merchandising personnel. MDS regularly makes use of markdowns and discounting to clear slow selling merchandise. MDS also uses a combination of measures to keep the Company’s inventory shrinkage to low levels, including using sensormatic tags on higher- priced items, CCTV cameras and maintaining security presence at each store.

Š Continue to improve business risk management through the risk management committee which was formed in 2011, which is responsible for: (i) managing insurance and disaster recovery planning;

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(ii) developing and implementing effective loss prevention programmes; (iii) monitoring compliance with the Company’s standard operating procedures and controls across the organisation; and (iv) managing the Company’s security infrastructure.

Š Continuously monitoring employee sales productivity and service intensity (being the number of square metres covered by each sales person) for each store in order to optimise service levels and profitability.

Š Strict cash control management with consistent policies across its store network and reconciling sales data with receipt records on a daily basis.

Š Maintaining MDS’ “lease only” strategy with a focus on entering into long-term lease contracts on favourable terms by leveraging MDS’ reputation as a top department store operator and its existing relationships with landlords. This strategy will serve to limit capital required to open new stores, while better insulating MDS from significant increases in commercial rental rates.

Continue to develop a customer-oriented corporate culture

Management believe that MDS’ customer-oriented corporate culture will provide a strong foundation to maintain and enhance its long term competitiveness.

Management believe that focusing employee training on customer-centric initiatives is instrumental for MDS to maintain its customer-oriented corporate culture. MDS intends to further build on a culture of motivated and well-trained employees. MDS actively pursues a strategy to recruit, develop and retain talented employees (including employees of consignment vendors) to maintain and improve its competitive position. Especially in light of its expansion plans, the Company places strong emphasis on actively developing staff with leadership potential to support its store opening plans. The Company has developed a number of testing and training programmes that seek to identify early on those members of its staff which have potential to become management. MDS’ structured training and development programmes are designed to support its customer- oriented corporate culture and service quality standards, and to enable employees to continue to meet customers’ changing needs and preferences.

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OVERVIEW

MDS is Indonesia’s largest department store operator by retail value sales with a market share of 31.6% of the department store retail sector in 2011 (source: Euromonitor, November 2012). The first Matahari store was opened in October 1958 and MDS pioneered the modern department store concept in Indonesia in 1972. Management believe that the Matahari department store brand, with a heritage of more than 50 years, is a well recognised and trusted department store brand within Indonesia. According to a survey by MarkPlus Insight in December 2012, MDS is the most frequently visited department store in Indonesia for the past five years preceding the survey. With over 2.4 million active members as at 31 December 2012, Management believe that MDS has one of the largest department store loyalty programmes, the MCC, in the country.

In 2007, 2008, 2009, 2010, 2011 and 2012, the Company’s Gross Sales were Rp4,933.2 billion, Rp5,959.0 billion, Rp6,919.5 billion, Rp7,907.1 billion, Rp9,247.2 billion and Rp10,884.0 billion respectively, representing a CAGR of 17.1% over that period. In 2007, 2008, 2009, 2010, 2011 and 2012, the Company’s SSSG was 13.6%, 19.1%, 9.9%, 11.2%, 13.6% and 11.1%, respectively.

MDS generates revenues from the sale of merchandise in its stores. These revenues primarily relate to (i) net revenue from CV Sales and (ii) DP Sales. In 2012, 70.9% of the Company’s Gross Sales was CV Sales and 29.1% was DP Sales. Since consignment vendors maintain their own inventory (owning the merchandise until time of sale) and bear all purchasing, payroll, working capital, distribution, warehousing and certain other costs, the Effective Contribution Margins for Consignment Goods and DP Goods for the Company are similar. Certain premium image brands under consignment, including Polo, Clinique, Revlon, Fladeo, Levi’s, Cardinal, Logo and Executive, have also played an important role in attracting customers to the Company’s stores.

In 2012, 78.8% of DP Sales were from MDS’ private label brands including Nevada, Cole, Little M and Connexion. These brands were among the top ten most popular “fashionable affordable clothing brands” in Indonesia, with Nevada ranking number one according to a consumer survey for unaided brand awareness conducted in 2012 by MarkPlus Insight (ahead of brands such as Polo and Levi’s). The Company’s private label brands are sold exclusively at MDS stores and Management believe that these brands play a key role in enabling the Company to differentiate itself from its competitors and make MDS stores an aspirational shopping destination for its customers.

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MDS opened seven new stores in 2010, nine new stores in 2011 and 13 new stores in 2012. Management believe that the Indonesian department store market is underserved, particularly given the size and rate of growth of the middle-income segment, and see significant opportunities to further expand MDS’ store network. MDS continues to build its pipeline of store openings and currently plans to open approximately 15 stores a year in the period from 2013 to 2015. Including the 15 stores it expects to open in 2013, MDS has identified more than 50 possible sites for stores (as at the Latest Practicable Date) and is constantly evaluating site possibilities to increase the number of sites which may lead to store openings in accordance with its expansion plans. The Company plans to further grow its network both in cities where it has an existing presence and in new locations across Indonesia. As a measure of the Company’s success, in June 2011, CNBC ranked the Company as one of the top five fastest growing companies in Asia based on average annual revenue growth from 2005 to 2010. In November 2011, MDS was the winner of Metro TV’s “Pride of Indonesia Company” award in the Indonesian retail sector. In May 2012, MDS won a service quality award from Carre for achieving excellent total service quality satisfaction based on a customer survey. MDS also won the 2011 and 2012 “Top Brand” award in the department store category, as awarded by Frontier Consulting Group and Marketing Magazine.

HISTORY AND DEVELOPMENT

The first Matahari store opened on 24 October 1958 and was located in Pasar Baru, Jakarta. By 1972, Matahari had successfully pioneered the modern department store concept in Indonesia by opening its first Matahari department store. The first Matahari department store outside Jakarta was opened in 1980, in Bogor. Prior to October 2009, the Matahari department store business operated as one of three divisions within PT Matahari Putra Prima Tbk (“MPP”) (the other two divisions of MPP being the ‘Food Business’ division and ‘Other Businesses’ division).

In October 2009, the Matahari department store business was carved out of MPP and acquired by PT Pacific Utama Tbk (“PU”), a company listed on the IDX and affiliated with MPP. PU did not own any material assets or businesses at the time. MPP retained a shareholding of approximately 91% in PU, with the remaining shares being held by another shareholder (approximately 7%) and the public (approximately 2%). PU was subsequently renamed PT Matahari Department Store Tbk in November 2009.

On 1 April 2010, MI acquired approximately 98% of the issued share capital of MDS. MI was 100% owned by ACC and MAC. ACC and MAC are companies whose ultimate beneficial owners (as defined by Rule 13d-3 under the US Exchange Act) are the CVC Funds, Government of Singapore Investment Corporation Pte. Ltd. (“GIC”), Multipolar and certain members of the Company’s management.

In September 2011, MI and MDS merged, with MDS as the surviving entity. As at the Latest Practicable Date the CVC Funds, Multipolar, GIC and certain members of management collectively are ultimate beneficial owners of approximately 61%, 20%, 15% and 2% of MDS Shares, respectively. The remaining approximately 2% of MDS is publicly held. Please see Section 15 – “Corporate and Shareholding Structure” for more detail.

STORES

Retail network

The Company has one of the most geographically diverse networks of department stores in Indonesia. As at the Latest Practicable Date, MDS operated 116 stores in over 50 cities across Indonesia. According to Euromonitor, in 2011, MDS was one of only two department store retailers with more than 100 stores in Indonesia, with the next largest department store retailers having less than half the number of stores of MDS. As at the Latest Practicable Date, the Company’s retail stores covered over approximately 750,000 square metres of total store space.

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The following map shows the location of MDS’ stores across Indonesia as at the Latest Practicable Date.

Kalimantan, Bali and East Sumatra Indonesia 18 stores 23 stores

Greater Jakarta 33 stores

West Java 11 stores Central Java 16 stores East Java 15 stores

The following table provides more information on the geographic reach of the Company’s stores as at the Latest Practicable Date, in accordance with the geographic segmentation in the Company’s financial statements.

% of total Location Number of stores number of stores Total store space Population(1) (sqm) (millions) Java ...... 75 65% 495,637 136.5 Sumatra ...... 18 16% 112,190 50.6 Kalimantan, Sulawesi and Maluku...... 19 16% 113,209 47.3 Others ...... 4 3% 28,988 3.9 Total ...... 116 100% 750,024 238.3

(1) Population figures obtained from Indonesian Central Bureau of Statistics 2010. Note: See “List of Stores” below for a complete list of the Company’s stores.

In 2012, 61.9% of Gross Sales were generated in Java, home to approximately 60% of the Indonesia’s population and where the majority of MDS’ stores are located. 16.3% of Gross Sales were generated in Sumatra, 16.9% in Kalimantan, Sulawesi and Maluku, 4.9% in Others.

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The following table provides information on the Gross Sales breakdown for MDS by region.

Gross sales Years ended 31 December CAGR Location 2010 % 2011 % 2012 % (2010-2012) (Rp billions, unless otherwise stated) Java ...... 4,962.2 62.8% 5,769.4 62.4% 6,736.5 61.9% 16.5% Sumatra ...... 1,220.5 15.4% 1,516.0 16.4% 1,772.9 16.3% 20.5% Kalimantan, Sulawesi and Maluku ...... 1,304.3 16.5% 1,498.5 16.2% 1,835.4 16.9% 18.6% Others(1) ...... 420.1 5.3% 463.3 5.0% 539.2 4.9% 13.3% Total ...... 7,907.1 100% 9,247.2 100% 10,884.0 100% 17.3%

(1) Others comprises the Bali stores in 2010 and 2011. Others in 2012 comprises stores in Bali and Papua.

MDS regularly reviews its portfolio of stores and may close unprofitable stores. In 2010, 2011 and 2012, MDS only closed one store which was as a result of a fire in 2011. As at the Latest Practicable Date, there are no planned store closures.

New store roll-out and expansion

Management expect an increasing number of modern shopping centres and retail malls to be developed in Indonesia. MDS seeks to locate its stores within such centres in order to take advantage of the higher customer traffic at such developments. Management believe that MDS is usually among the first potential anchor tenants approached by real estate developers who are considering a development, due to its strong Matahari department store brand and track record of attracting high levels of customer traffic. Strong relationships with large real estate developers such as PT Lippo Karawaci Tbk allow the Company to identify, negotiate and secure premium locations for new stores, especially in underserved regions outside of Jabodetabek. The breadth of the Company’s existing logistics network and its ability to vary each store’s merchandise mix provide it with flexibility in considering new store sites across Indonesia.

Since 2009, MDS has embarked on an accelerated store expansion programme. Under this programme, MDS opened seven new stores in 2010, nine new stores in 2011 and 13 new stores in 2012. As a result, MDS’ year-end total gross selling space was 526,774 square metres in 2007, 583,794 square metres in 2008, 594,108 square metres in 2009, 636,911 square metres in 2010, 677,826 square metres in 2011 and 750,024 square metres in 2012. The following table shows the Company’s net space addition by region:

Net space addition Locations 2009-2010 2010-2011 2011-2012 (sqm) Jabodetabek (Greater Jakarta) ...... 3,040 11,021 18,499 Java (excluding Greater Jakarta) ...... 18,421 21,647 20,698 Outside Java ...... 21,343 2,247 33,000 Total ...... 42,804 34,915 72,197

MDS continues to build its pipeline of store openings and currently plans to open approximately 15 stores a year in the period from 2013 to 2015. Including the 15 stores it expects to open in 2013, MDS has, as at the Latest Practicable Date, identified more than 50 possible sites for stores which are in line with MDS’ typical store size and is constantly evaluating site possibilities to increase the number of sites which may lead to store openings in line with its expansion plan. The Company plans to further grow its network both in cities where it has an existing presence and in new locations across Indonesia, particularly in underserved markets with sustained productivity outside of Greater Jakarta. In 2012, the Company’s annual productivity measured by Gross Sales per square metre of Retail Space for comparable stores was the highest outside Java. Gross Sales per square metre of Retail Space for stores outside Java, and for stores within Java (but outside Greater Jakarta) were 21% and 5.9%, respectively, higher than that for stores within Greater Jakarta.

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MDS has a dedicated real estate team, consisting of eight full time employees who are specifically responsible for identifying potential new sites and maintaining relationships with developers and intermediaries. The Company also has a real estate committee, consisting of five members of senior management including the Company’s chief executive officer and chief financial officer. This committee is responsible for reviewing and evaluating major development projects and potential new sites. In identifying potential sites for new stores, MDS focuses on a number of criteria, including expected rental costs, the size of the catchment area, population density, disposable per capita income of the total target market, expected profitability and financial returns and competition from other retailers in the surrounding area.

Once a new potential store location is approved by the real estate committee, the real estate team will proceed to negotiate the term of the lease, seek final approval from the committee, and then proceed with signing a memorandum of understanding and/or a lease with the relevant developer or intermediary. For a typical new MDS department store, the fit-out time is approximately four months. New stores typically cost approximately Rp2.5 million per square metre, although the amounts can vary depending on the location and layout of the store. New stores typically become generate operating profit within the first year, and repay their capital investments within three to four years.

The table below show the Company’s target areas for growth across Indonesia through 2015, as at 31 December 2012. Pipeline of potential sites for Locations 2013 planned Openings 2014-2015 Total Jabodetabek (Greater Jakarta) ...... 5 10 15 Java (excluding Greater Jakarta) ...... 2 8 10 Outside Java ...... 8 19 27 Total ...... 15 37 52

Note: These figures reflect potential stores that the Company plans to open and sites which the Company is considering. Depending on any number of factors, potential sites may not lead to store openings, and such store opening plans may change and may or may not materialise either in terms of numbers or locations indicated.

Given the Company’s track record of accelerated store expansion and long term relationships with real estate developers, Management is confident in its ability to implement its current expansion plan, subject to the availability of store locations and the timely completion of malls by developers. According to Euromonitor, the Company has opened more stores than any other department store operator in Indonesia between 2010 and 2012.

Store design

Management believe that the format and look of each store, along with its merchandise presentations, are key to the success of the Matahari department store brand. Management believe that store merchandise presentations and the associated visual merchandising are effective in communicating information on price, current trends and value, whilst also encouraging impulse purchases. For example, the Company may use deliberate lighting and displays of selected merchandise to create and encourage consumer interest in a particular seasonal colour of merchandise.

Important principles of the Company’s store presentation include: maintaining an open layout to permit easy circulation of customers throughout the store; creating eye-catching displays; providing good lighting; service centres; fitting rooms and mirrors; maintaining appropriate signage; matching internal communications with external advertising; maintaining proper assortment and grouping of products; and maintaining a clean and tidy environment for its customers. MDS also utilises a large number of mannequins to add vibrance to its stores and takes pride in its window displays which are designed centrally by a specially trained team and then rolled out to stores across Indonesia.

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To ensure consistent and proper implementation of the Company’s store presentation principles, store managers are regularly provided with instructions and training on current merchandising concepts and marketing directions to be applied across all the Company’s stores. MDS also provides workshops for the Company’s employees on store presentation principles. Management seek to ensure that all Matahari department stores are consistent in look and feel, although there may be variations depending on local market preferences and the merchandise available in the particular store. For example, the MDS store in Bali has a Balinese theme and stocks souvenirs in order to attract tourist shoppers.

MDS stores typically range from 5,000 to 9,000 square metres in size, with the largest store at Pluit Village being slightly over 21,000 square metres. As at the Latest Practicable Date, 34% of the Company’s stores are less than 5,000 square metres in size, 55% are between 5,000 square metres to 9,000 square metres, and 11% are larger than 9,000 square metres. The breakdown of selling space between Consignment Goods and DP Goods in MDS stores are generally in line with its breakdown in Gross Sales. Factors that affect the sizes of its department stores include availability and characteristics of sites, size of local market, ability to provide sufficient breadth of merchandise to cater for the Company’s target middle-income consumers as well as compliance with local regulations (see Section 19 – “Regulation”).

Ongoing improvement of existing stores

In addition to new store roll-outs, MDS constantly seeks to improve its stores and reviews each store’s refurbishment needs on an annual basis. MDS typically remodels its stores every five to seven years to ensure they offer a modern store environment. In line with its continuing refurbishment programme, the Company refurbished 15 of its stores in 2012, 13 of its stores in 2011 and 16 of its stores in 2010, representing 15%, 13% and 17% of total stores in the same periods. The Company plans to refurbish between 17% and 20% of stores each year through refurbishment.

Over the last three years, the Company has refurbished a total of 44 stores at a total cost of approximately Rp239 billion. The cost of refurbishing a store is approximately Rp3.1 billion to Rp6.2 billion (USD300,000 to USD600,000) and the refurbishment of a store may take from a few weeks to three months to complete, depending on the store’s refurbishment needs. The Company does not close its stores during refurbishment and, where necessary, refurbishment activities are phased to minimise disruption. During the refurbishment of a store, MDS may rent additional temporary space in the same mall to compensate for any loss of selling space in its existing store due to the refurbishment activities. Consignment vendors that participate in stand-alone bazaar sales by MDS are required to pay participation fees.

The Company’s store refurbishments focus on enhancing the overall shopping experience of its customers. This may include installing or improving lighting, product displays, signage, new fitting rooms, wider aisles and more modern fixtures, with a particular focus on improving inventory selection without affecting the store’s feeling of space.

Over the last three years, the Company has, in particular, placed emphasis on upgrading the presentation and range of merchandise in the ‘centre core’ of its department stores; this includes cosmetics, shoes, handbags and accessories. Management believe that the ‘centre core’ initiative has reinforced MDS’ reputation as a ‘destination’ for shoes, handbags and accessories, and has led to increased traffic at its stores. The Company has also implemented new initiatives to build on the strength of its exclusive private label brands and showcase private label merchandise more prominently. This includes implementing high impact key item presentations, for example, establishing a ‘Denim Bar’ in relation to denim jeans and shorts, and also having a dedicated section in-store for Nevada, the Company’s most popular private label brand and the most popular “fashionable affordable clothing brand” in Indonesia according to a consumer survey for unaided brand awareness conducted in 2012 by MarkPlus Insight.

Management believe that its refurbishment activities are key to ensure the continuing productivity of its existing stores.

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SALES AND MERCHANDISE

Strategy and market positioning

MDS’ target demographic segment is Indonesia’s large and growing middle-income consumer segment. Management believe that the Company’s broad selection of merchandise allows MDS to appeal to the tastes of all members of a typical middle-income Indonesian family in a single store. As at 31 December 2012, MDS offered more than 90,000 SKUs for its DP Goods, and Management estimate that there are more than 200,000 SKUs of Consignment Goods offered across its stores, across product categories including men’s, women’s and children’s clothing, shoes, homeware, cosmetics and accessories. The Company is, however, seeking to reduce the number of SKUs for its DP Goods as Management believe this can make the Company more profitable and efficient. MDS does not sell food or any other perishable products.

By analysing the purchasing habits and profile of its loyalty card membership base, which accounted for over 44.7% of Gross Sales in 2012, the Company is able to better understand its customers and to adjust its merchandise and price points both generally and in a particular store. For example, as at 31 December 2012, 71.0% of its loyalty card member base is female.

With the benefit of information on its customers’ purchasing habits and profiles, the Company tailors its merchandise mix (including its mix between DP Goods and Consignment Goods) for each store in accordance with the store’s local target market and its judgement of appropriate price points for that market, in order to maximise each store’s profitability.

For example, Matahari department stores in downtown Jakarta and other major cities tend to offer a higher mix of business attire and dress shoes as compared to stores in smaller cities and suburban areas which tend to offer a higher mix of casual clothing and footwear. The mix between DP Goods and Consignment Goods (which tend to be more expensive) also differs depending on the store’s target market.

The Company’s flexibility to customise its stores’ product offerings according to regional and/or demographic customer preferences is attributable to a number of factors, including its ability to source merchandise from a large and diverse base of both consignment vendors and direct-purchase suppliers, its efficient distribution operations, understanding of its customers and local markets and similar Effective Contribution Margins across both DP Goods and Consignment Goods.

The Company has a strong focus on merchandise for its young customers, matching Indonesia’s age demographics, with the “Youth Boys”, “Youth Girls” and “Children” product categories consistently accounting for approximately 40% of Gross Sales in 2010, 2011 and 2012. There is also a strong focus on continuing to grow the MDS shoes business – its highest selling and fastest growing product category. This product category accounted for 18.0%, 18.8% and 19.3% of MDS’ Gross Sales in 2010, 2011 and 2012 respectively, and Management believe it is a strong driver of traffic into the stores. The Company has positioned handbags and

Page 116 ------14. BUSINESS ------accessories as the next focal points of the business to further establish MDS as a destination shopping spot with its customers. The composition of Gross Sales by product category is set out in the table below.

Years ended 31 December Sales by product category 2010 2011 2012 (Rp billions, unless otherwise stated) Mens Casual ...... 771.1 9.8% 899.2 9.7% 1,057.3 9.7% Mens Formal ...... 561.5 7.1% 662.8 7.2% 795.4 7.3% Ladies ...... 630.4 8.0% 747.5 8.1% 913.6 8.4% Youth Boys ...... 999.2 12.6% 1,185.2 12.8% 1,421.5 13.1% Youth Girls ...... 951.9 12.0% 1,078.7 11.7% 1,243.8 11.4% Children ...... 1,213.8 15.4% 1,394.3 15.1% 1,590.9 14.6% Shoes ...... 1,422.7 18.0% 1,740.6 18.8% 2,105.2 19.3% Ladies Intimate ...... 371.5 4.7% 399.8 4.3% 446.5 4.1% Home, Bags and Ladies Accessories ...... 608.8 7.7% 704.2 7.6% 790.0 7.3% Cosmetics ...... 363.1 4.6% 420.9 4.6% 503.5 4.6% Others ...... 13.1 0.1% 14.0 0.1% 16.3 0.2% Total Gross Sales ...... 7,907.1 100.0% 9,247.2 100.0% 10,884.0 100.0%

Due to the difficulty of obtaining reliable market research data for the department store industry in Indonesia, MDS observes and reports on changes and developments in the demographic profile and spending patterns of the Company’s target market segments principally through a careful analysis of the purchasing habits of its customers but also by observing the merchandise and price points available in neighbouring stores. MDS also examines new markets for proposed store openings and monitors the Indonesian retail industry generally. The Company’s centralised business development team regularly monitors and evaluates data produced from the stores and will consider proposals for changes to the stores before they are implemented. See – “Matahari Club Card” for more information on customer data.

Types of merchandise

Merchandise sales in the Company’s stores consist of both sales of Consignment Goods and of DP Goods. The Company enters into agreements with certain consignment vendors, who are permitted to occupy designated areas in the Company’s stores and to establish, operate and manage their own product displays subject to certain guidelines from the Company. The Company receives a percentage of the CV Sales as a consignment margin. In addition, the Company sources and sells its DP Goods. The table below shows the respective percentages of Gross Sales which are attributable to Consignment Goods and DP Goods:

Years ended 31 December Type of Merchandise 2010 2011 2012 (Rp billions, unless otherwise stated) Consignment Goods ...... 5,537.8 70.0% 6,629.1 71.7% 7,712.1 70.9% DP Goods (including private label goods) ...... 2,369.3 30.0% 2,618.1 28.3% 3,171.9 29.1% Total Gross Sales ...... 7,907.1 100.0% 9,247.2 100.0% 10,884.0 100.0%

The Adjusted Gross Profit Margins on sales of DP Goods and sales of Consignment Goods have remained steady from 2010 to 2012. In 2010, 2011 and 2012, Adjusted Gross Profit Margins from DP Sales were 38.4%, 39.6% and 40.3%, and Adjusted Gross Profit Margins from CV Sales were 31.1%, 31.4% and 31.2% respectively. Since consignment vendors maintain their own inventory (owning the merchandise until time of sale) and bear all purchasing, payroll, working capital, distribution, warehousing and certain other costs, the Effective Contribution Margins for Consignment Goods and DP Goods for the Company are similar.

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Consignment Goods

In 2010, 2011 and 2012, 70.0%, 71.7% and 70.9% of MDS’ Gross Sales were attributable to CV Sales.

Certain MDS stores located in areas that attract a more affluent clientele, such as Jakarta, Surabaya and Medan carry more premium goods on a consignment basis in order to attract greater customer traffic. These Consignment Goods, primarily upscale cosmetics, branded fashion attire and accessories, reinforce the appeal of Matahari department stores to Indonesian consumers. Top selling Consignment Goods in the Company’s stores include Fladeo brand shoes, Cardinal and Logo brand clothes and accessories and Revlon and Estee Lauder brand cosmetics products.

Consignment retailing provides MDS with several benefits. Consignment Goods help to broaden the range of merchandise offered and the presence of international brands can also increase the brand image and attractiveness of stores generally. In addition, employment costs and working capital costs in connection with Consignment Goods are borne by the relevant consignment vendor. Consignment vendors maintain their own inventory (therefore eliminating risk to MDS in terms of inventory or shrinkage with respect to such goods), bear their own distribution and warehousing costs, provide their own sales staff, point of purchase advertising and displays (in compliance with MDS’ guidelines) for marketing their merchandise at MDS stores, and generally pay for the fit out expenses in connection with the display of their merchandise. Sales staff, employed by consignment vendors, also help to promote the Company’s brand as they are required to wear the Company’s uniform as well as attend the Company’s comprehensive training programmes. The cost of such staff uniforms and training is borne by the consignment vendor.

Private Label and Direct-Purchase Merchandise

In 2010, 2011 and 2012, 30.0%, 28.3% and 29.1% of MDS’ Gross Sales were attributable to DP Sales. DP Goods consist of directly purchased private label merchandise that are exclusive to the Company, as well as other merchandise which are directly purchased from suppliers for sale in the Company’s stores. In 2012, 23.0% of MDS’ Gross Sales were specifically attributable to sales of private label merchandise.

The Company has a strong suite of private label brands. It currently has over a dozen active private label brands including Nevada, Cole, Little M, St Yves, Super T and Connexion. The following table shows the Gross Sales achieved for the Company’s six most popular private label brands (by Gross Sales) for the periods indicated:

Years ended 31 December Private label brand 2010 2011 2012 (Rp billions, unless otherwise stated) Nevada ...... 654 28% 726 28% 876 28% Cole ...... 167 7% 186 8% 248 8% St Yves ...... 119 5% 164 6% 206 7% Little M ...... 160 7% 172 7% 193 6% Super T ...... 146 6% 160 6% 197 6% Connexion ...... 147 6% 137 5% 167 5% Total Gross DP Sales...... 1,392 59% 1,545 59% 1,887 60%

MDS’ private label brands Nevada, Cole, Little M and Connexion were among the top ten most popular “fashionable affordable clothing brands” in Indonesia, with Nevada ranking number one according to a consumer survey for unaided brand awareness conducted in 2012 by MarkPlus Insight. In the survey, over 50% of respondents named Nevada as their top fashionable affordable clothing brand. The strength of the Nevada brand is reflected in it contributing 28% of Gross DP Sales and 8% of total Gross Sales in 2012. The Company is continuing to invest in promotion of its Nevada brand through active marketing spend, diversifying into adjacent merchandise categories (e.g. Nevada perfume) and providing greater store space allocation to Nevada products.

MDS keeps track of the latest trend forecasts and predictions in the most important international fashion markets including New York, London, Paris and Tokyo through subscriptions to trend forecasting reports. Based on its

Page 118 ------14. BUSINESS ------assessment of fashion trends, the Company’s fashion coordinators decide on a range of key looks and colours to carry that season, which in turn guides the merchandise that the Company’s buyers procure as well as the manner of store presentation used to complement those colours. MDS works with suppliers to develop test samples of new products based on current fashion trends and some suppliers may proactively promote new products. Depending on the success of such samples, products are then purchased and distributed to relevant stores in the MDS store network. Each private label brand has a determined brand profile and new DP Goods purchased by the Company’s buying team are allocated to the most appropriate of the relevant private label brands. For example, the Nevada brand has a focus on clothes suitable for the casual, active and young customer.

Management believe that MDS’ private label brands have been a key component to the success of its business and that the strength of its private label offering enhances MDS’ negotiating power with consignment vendors. The combination of generally lower prices (as compared to Consignment Goods) and brand recognition make private label brands a product offering which caters well to the preferences of the middle-income customer segment. These private label brands are exclusive to MDS and differentiate MDS from its competitors. These brands are also supported by their own brand identity advertising programmes and ongoing in-store initiatives such as high impact key item displays and dedicated sections for key brands such as Nevada – see “Ongoing improvement of existing stores” above.

MDS has seen strong growth in its direct-purchase business with Gross Sales of DP Goods in 2010, 2011 and 2012 of Rp2,369.3 billion, Rp2,618.1 billion and Rp3,171.9 billion respectively. Management believe there is significant upside potential in the development of private label brands including the offering of new product lines under the most popular private label brands such as Nevada, and additional dedicated sections for top performing brands. Other initiatives that may be explored in the future include opening dedicated private label stores on a standalone basis.

Pricing

The Company actively monitors the prices of goods sold at other Indonesian department stores and seeks to offer its DP Goods at competitive prices which customers will perceive to be good value. According to a MarkPlus Insight survey commissioned by MDS in December 2012, more than 90% of respondents agreed that the Company’s private label brands are affordable, inspirational and fashionable. 98% of respondents agreed that the Company’s private label brands are of high quality and competitively priced.

To further strengthen customers’ perception of receiving good value for money, MDS regularly holds promotions and offers sales and markets products at discounts from the usual retail price. Due to the Company’s large store network and scale, long-standing relationships with suppliers and corresponding purchasing power to purchase merchandise at attractive prices, MDS is generally able to price its DP Goods competitively with products of similar quality, while still achieving attractive profit margins. Although MDS cannot unilaterally discount the prices of Consignment Goods, consignment vendors often choose to apply discounts to the prices of their goods in conjunction with MDS’ promotions.

Merchandising mix, including the split between Consignment Goods and DP Goods, is a key driver of average price points at each store. MDS focuses on achieving the right merchandise mix and resulting price points for each store, which is a critical success factor for the business. Given the Company’s similar Effective Contribution Margins across both types of merchandise, it is able to vary the ratio of Consignment Goods to private label goods according to its desired price point for a particular store.

Inventory management

MDS maintains computerised inventory controls throughout its network of stores. On at least a weekly basis, reports which show class-level inventory information by store are issued to all buyers. The Company also uses in-store merchandising personnel to monitor inventory levels and slow selling merchandise. MDS regularly makes use of markdowns and discounting to clear slow moving merchandise in its stores and regularly offers clearance sales to clear dated merchandise. For 2012, the Company’s inventory turnover rate (being the Company’s cost of goods sold divided by its average inventory per month) was 3.6 times.

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Inventory shrinkage is generally attributed in the retail industry to the following factors: customer theft, employee theft, accounting errors, spoilage and an inability to sell due to an item going out of fashion. To minimise inventory shrinkage, the Company uses sensormatic tags on higher-priced items, CCTV cameras and maintains a security presence in each store. The Company also regularly conducts stock taking for stores with inventory shrinkage of more than 1.1% of the store’s DP Sales. The Company does not bear any inventory risk in relation to Consignment Goods as consignment vendors maintain their own inventory.

CONSIGNMENT VENDORS AND DIRECT-PURCHASE SUPPLIERS

As at 31 December 2012, Consignment Goods and DP Goods were sourced from over 1,200 consignment vendors and direct-purchase suppliers (comprising over 950 consignment vendors and over 250 direct-purchase suppliers). In 2012, the Company’s top consignment vendor and top direct-purchase supplier accounted for only 17.8% and 4.2% of Gross Sales, respectively. MDS’ top 10 consignment vendors and top 10 direct-purchase suppliers accounted for 25.1% of CV Sales and 22.2% of DP purchases in 2012, respectively.

Approximately 90% of MDS’ merchandise is sourced locally, allowing MDS to avoid delays associated with the import of goods, respond quickly to changing inventory needs and fashion trends, as well as limit its exposure to foreign exchange risks and import taxes. The remaining 10% of DP Goods are sourced through local import agents who price in Rupiah and accept Rupiah payments from MDS.

Most of the Company’s consignment vendors and direct-purchase suppliers have long standing relationships with MDS. MDS has developed stable and close working relationships with its consignment vendors and suppliers and has had no material disputes with any of them in recent years. MDS conducts formal meetings with its major consignment vendors and suppliers at least four times a year. It also conducts meetings periodically to discuss items including shipping issues, new innovation, new systems and stores. Other measures to maintain close relationships with the Company’s consignment vendors and suppliers include organising social events such as an annual dinner gathering, where MDS gives awards to its top consignment vendors and suppliers based on certain criteria.

The Company’s policy is to promptly settle payments when due – MDS typically pays direct-purchase suppliers within 60 days of invoice, and pays consignment vendors the amounts due in respect of the previous month’s sales on the 15th of each month. This has enhanced the Company’s reputation with consignment vendors and direct-purchase suppliers and helped it to establish strong relationships.

Management believe that the Company’s strong and longstanding relationships with its consignment vendors and direct-purchase suppliers often lead to more favourable pricing, and priority being given to MDS in terms of timing and volume of merchandise supplied. This enables the Company to react quickly to inventory demand and changing fashion trends.

In determining its selection of consignment vendors or direct-purchase suppliers, the Company’s principal criteria include: (i) type and price of the merchandise; (ii) stock replenishment efficiency; (iii) reputation and reliability; (iv) quality control; and (v) market penetration. Negotiations with consignment vendors and direct- purchase suppliers are carried out centrally by the team at the Company’s headquarters.

Consignment Vendors

As at 31 December 2012, the Company had over 950 consignment vendors.

The Company’s agreements with consignment vendors will specify the category of products to be sold, the consignment margin and the space/locations provided to consignment vendors. Consignment vendors are usually not allowed to alter their product categories (e.g. changing its products from shoes to cosmetics) without the Company’s prior consent. These agreements are typically subject to renewal every six months. Consignment vendors are regularly evaluated by MDS and non-performing consignment vendors may be replaced with other consignment vendors or moved to a different part of the store.

Gross Sales amounts received from the sale of Consignment Goods are first collected by the Company and then paid to consignment vendors in accordance with the Company’s credit terms after deduction of all relevant expenses, fees and consignment margin. The Company also collects certain other fees from its consignment vendors such as administrative, promotional and marketing fees.

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The table below sets forth the Company’s top 10 consignment vendors by Gross CV Sales in 2012: Consignment vendor 2012 Gross CV Sales (Rp billions) % PT Sabang Mandiri Abadi ...... 264.1 3.4% PT Sumber Kreasi Fumiko ...... 236.3 3.1% PT Multi Garmenjaya ...... 223.0 2.9% PT Kirana Abadi Sentosa ...... 198.6 2.6% PT Joe Sasmita Lencana ...... 195.8 2.5% PT Delami Garment ...... 193.0 2.5% PT Surya Multi Laksana ...... 178.3 2.3% PT Kopanitia ...... 150.5 2.0% PT Binacitra Kharisma Lestari ...... 149.9 1.9% PT Megariamas Sentosa ...... 149.1 1.9% Total for top 10 ...... 1,938.6 25.1%

Total Gross CV Sales ...... 7,712.1 100.0%

Direct-purchase suppliers

As at 31 December 2012, MDS had over 250 direct-purchase suppliers and for 2012, 78.8% of DP Sales related to MDS’ private label brands. The remaining proportion of DP Sales mainly relate to personal care and cosmetic products. To mitigate any concentration risk with respect to private label brands, MDS has multiple direct- purchase suppliers for each of its top private label brands. MDS has not given minimum purchase commitments to any direct-purchase suppliers.

The table below presents information on the Company’s top 10 direct-purchase suppliers by DP purchases in 2012.

Direct-purchase supplier 2012 DP Purchases (Rp billions) % PT Loreal Indonesia ...... 81.7 3.9% PT Multiplikasi Anugrah Sejahtera ...... 53.8 2.6% PT Anugerah Sakti...... 45.0 2.2% CV Berkat Tresna Abadi ...... 44.6 2.1% PT Mentari Esa Cipta ...... 40.7 2.0% PT Talitha ...... 40.0 1.9% PT Citra Tenos Perkasa ...... 39.8 1.9% PT Kemuning Garmindo ...... 39.4 1.9% CV Prima Serasi ...... 38.9 1.9% PT Deden Basarah ...... 37.6 1.8% Total for top 10 ...... 461.5 22.2%

Total Gross DP purchase ...... 2,080.8 100.0%

QUALITY CONTROL

By controlling the selection of consignment vendors and direct-purchase suppliers, the Company can reduce risks arising from product quality issues. The Company also hires an independent third party to carry out quality control checks at the premises of direct-purchase suppliers. DP Goods are subject to spot inspections by each store and if any defects are detected, the relevant goods will be returned to the supplier for replacement. Similarly, although consignment vendors are responsible for ensuring the quality of their goods, the Company will take into account any record of defective goods in assessing the performance of a consignment vendor.

The Company provides warnings to any direct-purchase suppliers whose goods fail to meet the Company’s quality standards and to any consignment vendors in respect of whose goods customer complaints have been

Page 121 ------14. BUSINESS ------received. If issues with a particular supplier persist, the Company will discontinue purchases from that supplier. For consignment vendors who fail to meet the Company’s quality standards, the Company will seek to terminate the consignment agreement.

The Company is in the process of amending its standard form purchase agreements to provide, among other things, that (i) its consignment vendors and suppliers are responsible if any claims arise from the quality of their products, (ii) only genuine products may be sold in the Company’s stores and (iii) any products that require governmental approval, such as cosmetics, cannot be sold in the Company’s stores until such approvals are obtained. Management believe that the above terms reflect the general understanding that the Company currently has with its consignment vendors and direct purchase suppliers.

The Company has not taken out any insurance against product liability.

COMPETITION

Management believe that the department store industry in Indonesia is somewhat segregated, with each major retailer targeting a different customer segment within the market. According to Euromonitor, in 2011 the top two players comprised more than half the modern department store market share in Indonesia in terms of retail value sales (MDS: 31.6%; Ramayana: 22.5%). The rest of the market is highly fragmented, with the next largest department store operator, Mitra Adiperkasa, having only a 7.7% market share. Currently, MDS is the largest department store retailer in terms of retail value sales in Indonesia that focuses on the middle-income segment (source: Euromonitor, November 2012). Management believe that Ramayana targets the middle-lower and lower income segment while Mitra targets the high income segment. See Section 18 – “Industry” for more information.

Competition in the Indonesian retail market has become more intense in recent years. Management believe that, although the retail industry in Indonesia is highly competitive, the Company’s competitive strengths as set out in Section 13 “Strengths and Strategy” provide it with competitive advantages over both existing and potential new competitors and that various factors such as its close relationships with real estate developers and local suppliers, its broad and efficient logistics network, and efficient operating knowhow put it in an advantageous position when compared to new entrants.

PURCHASING AND DISTRIBUTION LOGISTICS

Purchasing

MDS purchases large quantities of DP Goods including for its private label brands. MDS operates a centralised procurement system, with buyers located at its head office in Jakarta purchasing merchandise for all of its stores. The Company’s buyers operate in accordance with an annual merchandising plan and budget, which is refined by a monthly automated control system that identifies the types of merchandise that require restocking. From data collected by MDS’ management information systems, its buyers are able to identify popular items as well as slow-moving items and can adjust their purchases accordingly. The Company’s buyers are also responsible for managing inventory levels and distributing goods to individual stores according to demand.

Distribution logistics

MDS operates one central distribution centre in Jakarta, and utilises three hubs in Bandung, Surabaya and Medan as smaller transit points for distribution of merchandise to stores within those regions. MDS generally appoints forwarders and transportation companies to operate the hubs, and plans to utilise more hubs in other regions to support its growth strategy. All DP Goods other than cosmetics flow through MDS’ central distribution centre, which is more than 26,000 square metres in size.

As at 31 December 2012, the efficiency of its logistics operations is recognised by approximately 180 consignment vendors who use the Company’s services to transport their own merchandise and pay MDS a service fee. The net cost of the Company’s logistics operations (after deducting third party service fees) was Rp3.4 billion and Rp1.2 billion in 2010 and 2011, respectively, which Management believe is low relative to the size of the Company’s operations, primarily due to the service fees it earns from its consignment vendors. In 2012, the Company’s logistics operations made a profit of Rp1.8 billion as the third party service fees received exceeded the costs of the Company’s logistics operations.

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Management believe the Company’s efficient logistics operations, which are highly complex within the expansive Indonesian archipelago, is a key competitive advantage for MDS and would be difficult for smaller competitors or new entrants to replicate over the medium term.

To maximise efficiency and reduce costs, the distribution centre is operated as a “flow-through” facility, delivering goods on a “just-in-time” basis. The Company does not have a policy of storing inventory at its distribution centre. Taking into account lead times and inventory requirements, suppliers deliver goods regularly to the Company’s distribution centre, which are then promptly distributed by MDS on to the relevant stores. See – “Information Technology” for more detail on the Company’s information technology systems that support its distribution logistics.

The Company’s supply chain utilises two main forms of transport: (i) land transportation comprising local and outstation deliveries which accounts for approximately 80% of the distribution centre’s volume; and (ii) sea freight for inter-island transportation which accounts for approximately 20% of the distribution centre’s volume.

For deliveries within Jabodetabek, the Company’s distribution centre runs a fleet of 24 vehicles which serves the 33 stores located in Jakarta, Bogor, Depok, Tangerang and Bekasi as at the Latest Practicable Date. These trucks and minivans make deliveries six days a week and each truck does one or two trips per day. During peak seasons, the distribution centre may also use contract transporters. Management do not foresee any material issues with regard to the use of contract transporters.

For transportation to Sumatra, the rest of Java and Bali, MDS uses contract transporters that are on its approved vendor list. As at the Latest Practicable Date, there were over 63 stores in these areas and delivery frequency to the stores from three to six times a week, with the time required for deliveries to reach its destination ranging from two to ten days.

For transportation to East Indonesian regions including Sulawesi, Ambon, Kalimantan and Batam, goods are shipped using freight forwarders. MDS uses eight several freight forwarders to cover shipments to 20 stores in East Indonesia as at the Latest Practicable Date. The time required for goods to reach their destinations average between 12 and 21 days with a shipping frequency of one to two times a week.

MANAGEMENT AND OPERATION

Management organisation and functions

The Company’s management is structured by way of a three tiered management structure – central management located at its headquarters in Jakarta, regional management in each region and local management located in each individual store.

Central management

The Company’s headquarters are currently located in Jakarta. Central management consists of the following functions: merchandising, marketing, store operations (including visual presentation, customer service and maintenance), finance and accounting, real estate, human resources, procurement, legal and corporate secretarial. The distribution centre management is based at the distribution centre in Balaraja.

Regional store management

The Company has eight regional store managers (three in Jakarta and one each in West Java, Central Java, Sumatra, East Java and East Indonesia) who each oversee between 10 and 20 stores within their local region. Regional store managers report to the store operations director, and are primarily responsible for the following within their operation region: management and supervision of the stores, reviewing and following up on suggestions provided by local management, training of sales and administration staff and development of new stores and formulation of regional development plans.

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Local store management

Each store has its own store manager. The store manager is responsible for maximising store sales, local marketing, inventory control, customer relationships and provision of customer service. Based on the individual store experiences, local management will provide suggestions to regional management with regard to various matters such as improvements to store operations, initiatives to help increase Gross Sales, marketing and merchandise range.

A comprehensive store operations and management manual, covering areas such as management of merchandise and sales counters, cashier and cash receipt, window display, promotion and marketing activities, finance, emergency procedures and security, has been prepared by the Company’s central management at headquarters and each store is required to adhere to the operational guidelines contained therein. The Company’s policies and guidelines with respect to corporate and store operational procedures are compiled by central management and updated regularly.

Cash management

Payments for merchandise sold at the Company’s stores are primarily made with cash and, to a lesser extent, debit and credit cards. The Company applies consistent policies for cash management across its store network. The Company has arrangements for external security firms to collect cash receipts from the Company’s stores and has a policy of depositing its cash with banks and reconciling sales data with receipt records on a daily basis. Consignment Goods are paid for at cash registers operated by employees of the Company only and no consignment vendor is permitted to handle cash or other payments. The Company has also taken out insurance policies to cover money on premises and money in transit.

Store audits

The Company conducts routine audits of its stores, auditing each store two to four times a year. There are also special project audits where stores are chosen for specific reasons. The Company’s risk management and loss prevention teams, as well as its corporate audit teams, conduct operational audits in accordance with the Company’s standard operating procedures. Stores are constantly monitored using exception-based reporting and irregular activities are immediately subject to audit.

Corporate audit reports are provided to the President Director, the Board of Commissioners and the Company’s audit committee. All significant findings are discussed among the Company’s management team and individual stores are required to revert on the measures and follow-up actions taken subsequent to each internal audit conducted.

For more information on the Company’s internal audit unit and other corporate governance measures, see Section 17 – “Corporate Governance”.

INFORMATION TECHNOLOGY

MDS has invested in several software systems to enable it to more effectively run its business operations. All of the Company’s stores are linked through a common computer wide area network that facilitates the flow of information among stores and distribution centres, enabling nationwide Gross Sales reports to be sent to management on a daily basis.

Core software systems

The Company utilises a sophisticated set of software that are fully integrated with each other to provide an IT backbone which avoids duplication errors and improves the Company’s efficiency of operations.

Merchandising system – Retek The Retek System monitors a wide portion of the Company’s core retail processes, starting from merchandise planning to invoice matching for suppliers’ payments. The Retek Merchandising System is a merchandise

Page 124 ------14. BUSINESS ------management system which records and controls all retail business information and provides consistent, accurate data across all integrated systems. The Retek System is integrated with both the Company’s financial and warehouse management systems.

Accounting system – Oracle Financial Accounting The Company uses Oracle Financials software systems to support its accounting management requirements. The software enables the Company to create detailed, auditable, reconcilable accounts from a variety of source systems. It includes an accounting transformation engine with extensive validations plus accounting and rules repositories. The repositories provide centralised control, detailed audit trails, and simultaneously accommodates diverse corporate, management and reporting requirements.

Distribution centre system – Manhattan The Company utilises the Manhattan Warehouse Management System to manage operations in its distribution centre and more effectively carry out inventory management and re-ordering processes.

Others The Company also uses additional software systems such as Pro-Int (for its human resources and payroll operations), AlphaPOS (for its point-of-sale terminals), THOR (in relation to the Matahari Club Card loyalty systems) and Lotus Notes (for its email systems).

Recent major IT infrastructure initiative

In 2010 and 2011, the Company made a significant investment in a major IT infrastructure project. The infrastructure project enabled the Company to transfer its core software systems on to its own dedicated hardware, thereby completing its separation from MPP. The dedicated hardware is housed in a data centre managed by VisioNet. Please see Section 16 – “Affiliated Transactions” for more information on this.

The Company also invested in a disaster recovery centre, managed by a third party provider, which is fully functional on a standalone basis and which has a duplicate set-up of all of the Company’s hardware and software. This will allow the Company to switch over to the disaster recovery centre and continue to operate in the event of any significant disruption to its existing data centre. Given Indonesia’s geographic location it is prone to earthquakes and this is viewed by Management as an important risk management strategy.

STORE LEASES

All of the Company’s stores premises are leased.

The Company’s stores are leased from a combination of: (i) various parties not affiliated with the Company; (ii) Lippo Group companies (being MPP and Lippo Karawaci); and (iii) LMIR REIT, a listed Singapore REIT, managed by a Lippo Group company. Lease arrangements with affiliated parties are entered into on an arms’ length basis. See Section 16 – “Affiliated Transactions – Property Leases”. In 2012, stores leased from affiliated parties accounted for 33% of total lease payments. The table below shows the breakdown of the Company’s store leases according to the above categories as at the Latest Practicable Date.

% of total store lease Number of % of store payments for stores % of stores space 2012 Non-affiliated parties ...... 74 64% 64% 67% MPP and Lippo Karawaci ...... 23 20% 19% 17% LMIR REIT ...... 19 16% 17% 16% Total ...... 116 100% 100% 100%

With the exception of approximately 2% of the Company’s stores that have leases denominated in US dollars, all of the Company’s lease arrangements are denominated in Rupiah.

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Of the total 116 leases, 42 (36%) provide for a variable rent and 74 (64%) provide for a fixed rent. The Company has two types of lease arrangements: (i) those with fixed rent arrangements based on a charge per square metre with escalations following periodic contract periods; (ii) those based on variable rent that are pre-set as a percentage of the store’s Gross Sales, with or without minimum rents (including certain leases which are governed by a standard set of terms previously renegotiated on a blanket basis – see Section 16 – “Affiliated Transactions – Property Leases”).

Most of the Company’s lease arrangements are for a primary period of ten years, with options at the Company’s discretion to renew the lease twice for a period of five years at a time. Leases typically do not contain early termination clauses. Taking into account options available to the Company to renew existing leases, leases in respect of 24% of the Company’s stores are due to expire within the next five years, 19% within six to ten years and 57% in more than 10 years. In practice the Company is likely to enter into discussions with a view to extending a lease where this suits the Company’s strategic plans. As at the Latest Practicable Date, all stores already in operation are the subject of signed leases, and of the more than 50 sites in the Company’s pipeline of potential new stores, memorandums of understanding have been signed or are being negotiated in respect of nine stores.

MARKETING

Advertising and promotion

MDS utilises a variety of media in its advertising and promotional activities, including its website, television and radio. In particular, MDS has a strong focus on print advertising throughout the year by way of direct mail, newspapers, magazines, banners and handbills. MDS also has Facebook and Twitter accounts and plans to more actively utilise these for future promotional and marketing activities. As at 31 December 2012, 82.5% of the Company’s loyalty card members have mobile phones. This enables the Company to bolster its marketing activities with targeted SMS marketing campaigns. In 2012, the Company spent 64% of its marketing expenditure on print media (including newspapers and magazines), 9% on television and radio advertising, 12% on expenses relating to models and photography and 15% on other advertising related expenditure. The Company’s marketing expenses were Rp86.6 billion, Rp104.1 billion and Rp142.4 billion, respectively, for 2010, 2011 and 2012, which represented 1.1%, 1.1% and 1.3%, respectively, of total Gross Sales during those periods.

Management believe that the Company’s advertising campaigns have successfully established MDS’ image as a retail market leader which offers value for money to customers.

Much of the Company’s advertising is “promotions” focused, reinforcing its strategy of providing its customers with good value. MDS frequently has discount days with marked-down items and “bonus buys” in which consignment vendors frequently participate. MDS also advertises specific merchandise at different times of the year to take advantage of holiday events and seasonal changes or to clear inventory from prior seasons. In connection with specific sales events, MDS runs advertising campaigns that highlight certain items offered at attractive promotional prices. The Company’s advertising seeks to reflect the inspiring, upbeat and confident tone of the prosperous middle-income Indonesian family, enjoying a modern lifestyle. The Company publishes catalogues and flyers which are designed to reinforce the Company’s various store brands identified through the use of identifying colours and prominent logos.

MDS also promotes the Company’s store brand through the use of shopping bags bearing the Company’s distinctive name and logo. Management believe the Company’s shopping bags, which are reused by many of the Company’s customers, have been successful in promoting the Company’s brand name.

MDS seeks to connect its advertising activities with its in-store advertising through the consistent use of strong visual cues designed to encourage the Company’s customers to purchase its merchandise. Examples of this approach include using large, simple messages on windows facing the mall or road, feature walls and including harmonised print materials and other offers at the point of purchase.

MDS actively markets its stores during “major events”, including new store openings, anniversaries and holidays and other events such as Lebaran, Christmas, ‘back to school’ and Chinese New Year, through newspapers and

Page 126 ------14. BUSINESS ------catalogues, flyers and banners. MDS also markets more actively during major brand sales events such as office fairs and ‘back to school’ days, which target families with students returning to school. MDS also engages in selective marketing which involves very low pricing on items that is aimed at attracting significant customer numbers to its stores.

Store openings offer major promotional opportunities, particularly in smaller cities and towns. When MDS is the first major department store to open in an area, it will coordinate with the developer of the shopping centre or mall, local officials and its suppliers to sponsor a major celebration that is accompanied by various in-store promotions. These events, and the local press coverage that accompanies them, provide the new MDS department stores significant local exposure and encourage local residents, who may be unaccustomed to MDS to familiarise themselves with the new MDS department store.

Customer service

Management believe that good customer service is critical to the Company’s ability to continue to attract and retain loyal customers.

As such, the Company has implemented structured training and development programmes for its employees which seek to improve its standards of customer service, including training that is not only specifically focused on customer service, but also broader skills such as English language skills and building self confidence. The Company’s employees as well as personnel employed by consignment vendors are trained in understanding service from a customer’s perspective and to meet and exceed the Company’s customer’s expectations. See – “Employee training” below. To measure the Company’s performance, MDS regularly schedules evaluation visits by supervisors and by “mystery shoppers” unknown to store personnel, who report on the overall shopping experience.

All MDS store staff and consignment vendors’ staff are required to wear uniforms, and MDS has implemented consistent grooming and physical appearance standards. Consignment vendors are responsible for ensuring that each of their staff meet the Company’s standards on training and presentation.

Information and service counters in MDS’ stores are available to assist customers with any queries, and MDS also provides various amenities such as restrooms, prayer rooms, sitting areas, car parking facilities and gift wrapping services. MDS’ stores also hold special events such as fashion shows which Management believe enhances the shopping experience of its customers. As a result of the Company’s nationwide network, customers are also provided with the flexibility of paying for an item in one store but arranging for collection in another store. In line with industry practice in Indonesia, the Company does not have a returns policy. However, customers may exchange goods within seven days of purchase (e.g. damaged merchandise, or exchanges for different colours of the same product).

Matahari Club Card

A key component of the Company’s success has been the MCC loyalty card programme, which was first introduced in 2000 to cultivate long term relationships with customers.

Following the acquisition of MDS in 2010, MCC was re-launched in June 2011 as a loyalty programme specifically for MDS customers, which marked the Company’s separation from MPP. As part of the re-launch, the rewards and benefits available to its members were upgraded and a website specifically for MCC customers was also introduced. With over 2.4 million active members as at 31 December 2012, Management believe that MCC is one of the largest department store loyalty programmes in Indonesia and is continuing to grow. In 2012, over 250,000 new subscribers were added to the MCC cardholder base. MCC currently offers customers a choice of three types of loyalty cards – a regular card (held by the majority of MCC cardholders), a premium card and a beauty card.

In 2012, over 44.7% of the Company’s total Gross Sales were derived from MCC cardmembers. In 2012, MCC customers had an average transaction value that is approximately 65.3% larger than non-MCC customers. In particular, MCC beauty card customers have an average transaction value that is approximately double that of non-MCC customers.

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The broad base of the MCC loyalty programme provides the Company with access and insight into the purchasing habits of over 2.4 million of its most loyal customers. Data collected through customers’ use of the MCC loyalty cards enables the Company to track a variety of customer information including merchandise preferences and purchasing habits. The provision of customer data enables the Company to target its marketing programmes at specific stores on specific days, by way of communicating with customers via SMS. Management plans to further refine its MCC data mining capabilities so as to obtain valuable input in respect of strategic decisions regarding: (i) the merchandise mix of a store; (ii) pricing; (iii) new store opportunities, locations and sizes; (iv) in-store merchandising and display strategies; and (v) advertising and promotional programmes.

MCC cardholders enjoy various benefits such as rewards points based on purchases, exclusive third party tie-ins and exclusive shopping opportunities. Cardholders also receive special discounts on selected items and are eligible to participate in special discount days at the Company’s stores. Holders of beauty and premium cards are charged a subscription fee in return for additional benefits, such as a 2% (as opposed to 1% for the regular card) effective rebate on purchases by way of redemption points, discount promotions, special discounts with over 70 merchants and free personal accident insurance. The card cannot be used as a credit card, although there is potential for future tie-ups with credit card companies. MDS distributes information about the Matahari Club Card in its stores and on its website.

Seasonality

The Company’s Gross Sales are affected by seasonality. The most important trading periods for the Company in terms of Gross Sales are the Lebaran, ‘back to school’, Chinese New Year and Christmas shopping seasons, and the Company typically increases its marketing efforts in the run up to these holidays or events. Gross Sales during the 44-day traditional celebration period preceding Lebaran in aggregate amounted to 24.9%, 25.1% and 25.3% of total Gross Sales in 2010 (30 July – 11 September), 2011 (19 July – 31 August) and 2012 (8 July – 20 August), respectively, making Lebaran the single most significant seasonal period for the Company. The Company incurs additional expenses in advance of its peak periods in anticipation of higher Gross Sales, including in relation to additional advertising or promotional campaigns and additional staff costs. In respect of DP Goods, the Company usually orders additional goods in advance of peak selling periods. All employees in Indonesia also receive an allowance of one month’s salary prior to Lebaran in accordance with Indonesian labour laws.

EMPLOYEES

Staffing

MDS employed 12,702 employees as at 31 December 2012, consisting of 11,985 store personnel and 717 executives, senior managers and head office staff. Management believe MDS has a motivated and stable workforce, with a staff turnover rate of approximately 7.28%, 8.65% and 6.16% in 2010, 2011 and 2012 respectively. MDS considers its relations with its employees to be good. The following table reflects the number of MDS’ employees as at the dates indicated: Years ended 31 December 2010 2011 2012 Function(1) Store personnel ...... 9,690 10,864 11,985 Headquarters staff ...... 732 710 717 Location Jabodetabek (including headquarters) ...... 3,531 3,725 3,763 West Java ...... 1,028 1,125 1,334 Central Java ...... 1,367 1,387 1,525 East Java ...... 1,077 1,345 1,592 Total for Java 7,003 7,582 8,214 Sumatra ...... 1,600 1,733 1,859 Kalimantan and Other Regions ...... 1,819 2,259 2,629 Total ...... 10,422 11,574 12,702

Note (1): Does not include staff employed by consignment vendors.

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Consignment vendors hire their own store personnel to sell Consignment Goods in MDS stores, pay for MDS uniforms and have them attend MDS’ training programmes to ensure that their staff comply with MDS’ service standards. Management estimate that the number of consignment staff in 2010, 2011 and 2012 was approximately 29,700, 30,500 and 42,800 respectively.

The number of sales staff employed by the Company and by consignment vendors at any particular store depends on factors such as the store’s retail selling space and Gross Sales. Generally, the larger the store, the fewer sales personnel required per square metre, and the higher the Gross Sales, the more sales staff required. The Company also monitors employee sales productivity and service intensity (being the number of square metres covered by each sales person) for each store in order to optimise service levels and profitability. For example, if the sales productivity of staff in a particular store is unusually high, this may indicate a need to increase the number of sales staff to maximise sales.

Sales staff are employed on two shifts since the Company’s stores are typically open 12 hours a day. Cost of labour is still low in Indonesia as compared to the cost of labour in developed countries. As a result, the Company’s labour expenses for the Company’s store staff were 3.6%, 3.4% and 3.6% of Gross Sales for 2010, 2011 and 2012, respectively. See Section 12 – “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Factors Affecting the Company’s Results of Operations – Controlling operating expenses”

MDS also employs temporary staff in its stores, particularly during peak periods (for example, during the Lebaran, ‘back to school’, Chinese New Year and Christmas periods).

Employee training

The Company has structured training and development programme to develop employee skills with a focus on customer service. The Company implements training at all levels and particularly focuses on providing training to its managers. General training programmes include induction training for new employees on the Company’s policies and procedures, “train the trainers” programmes, and English courses. Sales staff are provided with training on customer service and building self confidence. Supervisors are provided with training related to the specific skills needed to carry out their roles and responsibilities, such as analysing store needs. Managers are provided with training programmes on topics such as interpersonal skills and creative thinking. The Company also has a career development programme which includes leadership training for store managers, assistant managers, supervisors and coordinators. Staff hired by consignment vendors are also required to undergo the Company’s training to ensure a consistent standard of customer service.

The Company also sends its employees to testing and training programmes that seek to identify those members of its staff which have potential to become management. Management places emphasis on the development and retention of such staff, particularly those with leadership potential, especially in light of the Company’s expansion plans. The Company has developed a number of testing and training programmes that seek to identify early on those members of its staff which have potential to become management.

In 2010, 2011 and 2012, the total cost spent by MDS for the training needs of employees during the year amounted to Rp0.7 billion, Rp1.8 billion and Rp2.2 billion, respectively.

Performance management

The Company regularly evaluates its personnel with performance appraisals and competency assessments. Performance appraisals include a quantitative measurement of an employee’s performance with reference to key indicators such as sales targets, professionalism and leadership. Competency assessments evaluate particular employees’ competencies and identify where improvement is needed to achieve satisfactory performance. Based on performance appraisals and competency assessments, MDS is able to identify outstanding employees and place such employees in positions for which they are most suited.

Employee bonuses, salary increments and promotions are tied to their job performance. MDS also has recognition reward programmes in place which provide a personal touch to internal corporate relations through congratulatory notes, service year rewards and birthday greetings, as well as condolence cards and notices.

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Management believe that having the above steps in place are important to enable the hiring and retention of suitable employees as well as to ensure that a management continuity programme is in place.

Employee relations

In accordance with regulations in Indonesia, all of the Company’s employees are entitled to pension benefits under the Man Power Social Security Programme (Jaminan Sosial Tenaga Kerja – Jamsostek). The programme requires a contribution of 5.7% of employees’ gross salary, of which 2% come directly from the employees. Other than a contribution of 3.7% of employees’ gross salary, the Company has no obligations to provide payments to its employees under this programme.

To increase retention, MDS offers bonuses and other incentives, including a car ownership programme (in accordance with the employee’s grade level), healthcare, life insurance and maternity leave.

In 2002, MDS developed an organisation known as the BIPARTIT Forum to facilitate communication between management and employees, and to permit local management within the Company’s organisation to directly address workplace issues without third party or union involvement. MDS has not experienced any significant labour disturbances since developing this forum, and has not experienced any significant labour disturbances for several years.

While MDS has no unions, it has set up the Lembaga Kerjasama or Cooperation Body (“LKS”) to mediate disputes between management and employees. LKS is made up of minimum three employee representatives and three management representatives. Cases that LKS is unable to settle are forwarded to the Indonesia Department of Labour for review and settlement.

Additionally, to foster better relations with its employees, MDS established the Matahari Employee Association (Ikatan Karyawan Matahari or “IKM”) in 2003, which organises sporting, religious, social, and other events for its employees. All the Company’s employees are automatically members of IKM.

TRADEMARKS

The Company uses certain trademarks in its day-to-day operations. These include the rights to use trademarks, logos and other intellectual property rights relating to its private label brands (“Private Label trademarks”) and the rights to use the ‘Matahari’ department store trademarks and logos (“MDS trademarks”).

The Company owns all of its Private Label trademarks, with the exception of pending applications to the Directorate General of Intellectual Property Rights of Indonesia, Ministry of Law and Human Rights of the Republic of Indonesia (“Directorate General of IPR”) for twenty new Private Label trademarks and pending applications for the renewal of twenty two Private Label trademarks.

As the word “Matahari” means “sun” in Bahasa, the Company does not have ownership rights over the word itself as a matter of practicality, but it owns all of the MDS trademarks across various classes including those of fabrics, clothing and advertising. The Company has granted Mr. Hari Darmawan, the founder of the Matahari department store business, limited rights to use certain MDS trademarks only in relation to the following business activities: (i) Taman Wisata Matahari (waterparks); (ii) Matahari Caritaria (leisure centres); (iii) Rumah Matahari (hardware); and (iv) Matahari Foodcourt, provided that (a) such business activities are not in retail business (department store) and do not compete with the businesses of the Company, and (b) such use by Mr. Hari Darmawan will not negatively affect the Company’s business or business image. Mr. Hari Darmawan has the right to grant sub-licenses only to companies in which Mr. Hari Darmawan and/or his legitimate wife and/or children has (whether directly or indirectly) the power to influence the operation of such companies by holding at least more than 50% of the issued capital of such companies. In addition, the above licenses granted to Mr. Hari Darmawan relate only to the Company’s old logo (which is red and green) – the Company’s new logo (which is red) is not licensed to any third party.

The Company has invested substantial amounts in its trade name, “Matahari Department Stores”, and continues to run image advertising designed to reinforce the strength and value of the Company’s trade name.

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LEGAL PROCEEDINGS

From time to time, the Company may be involved in legal proceedings concerning matters arising in connection with the conduct of its business. Currently, there are no material pending claims or legal proceedings, nor are there legal proceedings that are not in the ordinary course of business, involving the Company.

INSURANCE

The Company insures its distribution centre and all its stores. The coverage includes merchandise inventory losses, losses resulting from events such as fire, earthquakes, floods, riots, strikes and acts of terrorism or sabotage, business interruption and public liability. The Company does not have product liability insurance. Management believe the Company’s insurance coverage is in accordance with industry standards in Indonesia.

As at 31 December 2012, approximately 44% (by premium amount) of the Company’s business and property and equipment insurance policies were placed with Lippo Group companies – PT Lippo General Insurance Tbk, and PT Asuransi Central Asia. See Section 4 – “Risk Factors – Risks Relating to Business – The Company’s insurance policies may be insufficient or the Company may experience a delay between an insured loss occurring and being is compensated by its insurers”.

BUSINESS LICENCES

Pursuant to Trade Minister Regulation No. 53/M-DAG/PER/12/2008 on Guidelines for Organisation and Supervision of Traditional Markets, Shopping Centres and Modern Stores, all of the Company’s stores are required to operate under a modern store business license (Izin Usaha Toko Modern or “IUTM”) issued by the relevant regional governments. Based on this regulation, a company which already has an IUTM is not required to have a trade business license (Surat Izin Usaha Perdagangan or “SIUP”). For stores located in Jakarta, the Company is required to operate under an additional private market business operation license (Izin Penyelenggaraan Usaha Perpasaran Swasta or “IPUPS”) issued by the governor of Jakarta. Some of these licenses require re-registration every five years.

As a result of the restructuring in October 2009 and the resulting change of ownership in 2010, the Company was required to re-apply for and obtain again all of its necessary business licenses.

As at 31 December 2012, 110 stores have obtained SIUPs, IUTMs or both. Also, 17 of 18 stores in Jakarta have received IPUPSs and the Company is in the process of obtaining an IPUP for the 1 remaining store. The Company is also required to comply with the terms and conditions provided in the relevant licenses (including IUTM and IPUPS).

While most of the SIUPs and IPUPSs required by the Company have been obtained, the IUTMs have been issued for only 28 of 116 stores as at 31 December 2012. The requirement to obtain an IUTM was implemented in 2008 for companies engaging in modern store business activities. However, due to the absence of certain regional implementing regulations on the issuance of IUTMs, most of the relevant local governments have informed the Company in writing that they were unable to process its applications and/or to issue an IUTM despite having received the Company’s full and complete applications. In the absence of IUTMs, the relevant stores run their daily operations based on SIUPs.

The lack of implementing regulations is an issue that affects the overall retail industry and not just the Company. Other companies that engage in retail business activities have also tried to apply for the IUTM but have not received approval for the same reason. However, failure to obtain certain licenses (including IUTM and IPUPS) or failure by the Company to comply with the terms and conditions (including with respect to certain restrictions and/or reporting obligations) required under the relevant licenses (including IUTM and IPUPS) may be subject to administrative sanctions (e.g. warning letter, temporary closure of the operation of the relevant store or revocation of the relevant licenses), fines and/or imprisonment based on the applicable law and regulations.

The Company continues to endeavour to obtain the outstanding IUTMs. The Company has never received any warning letters or administrative sanctions in relation to the lack of an IUTM for any of its stores. See Section 4 – “Risk Factors – The Company may be unable to obtain certain required licences and registrations for its stores” for more information.

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CORPORATE AND SOCIAL RESPONSIBILITY

MDS is involved in various charitable endeavours. In 2011, MDS donated to the Education Foundation of Pelita Harapan for Vendor Gathering, the University of Pelita Harapan, the Shohibul Istiqomah Foundation, and to churches in remote areas for a Christmas event. Together with the Obor Berkat Indonesia Foundation, MDS also built a community health centre in Hargobinangun, Pakem. MDS has also supported a number of initiatives including a charity which provides hernia operations for children in Indonesia, UNICEF and the Charity Fund Foundation of Kompas for the victims of the Mount Merapi earthquake, through the donation of customers’ change.

LIST OF STORES

The following is a list of the Company’s stores by geographic region. As indicated above, MDS stores typically range from 5,000 to 9,000 square metres in size, and the largest store at Pluit Village is slightly over 21,000 square metres. As at 31 December 2012, the immediately following table shows how long the Company’s current 116 stores have been operating: More than 10 Less than 2 years 2-5 years 6-10 years years Total Number of stores ...... 22 19 27 48 116

List of stores by geographic region Greater Jakarta Blue Plaza – Bekasi MDS Galleria Blok M MDS Galleria Pasar Baru MDS Arion MDS Arthagading MDS Atrium MDS Bale Kota MDS CBD Ciledug MDS Cibubur MDS Cilandak Town Square MDS Cilegon Mayofield MDS Cimanggis Mall MDS Citraland MDS Daan Mogot MDS Depok Town Square MDS Ekalokasari MDS Gajah Mada Plz MDS Grand Mall Bekasi MDS Kalibata Mall MDS Karawang MDS Klender MDS Kramat Jati MDS KTC Kelapa Gading MDS Lippo Cikarang MDS Lippo Karawaci MDS Metropolis MDS Metropolitan Mall MDS New Taman Anggrek MDS Pejaten MDS Pluit MDS Pondok Gede MDS Serang Land MDS Taman Palem MDS WTC Serpong MDS Bogor Trade World SM Bogor

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West Java (excluding Greater Jakarta) Galleria Bandung MDS Cirebon Superblock MDS Festival Bandung MDS Grage Mall MDS Istana Plz Bdg MDS King Plaza MDS Sukabumi Mayofield MDS Tasikmalaya Central Java Galleria Jogya MDS Grand Mall Solo MDS Hartono MDS Java Super Mall MDS Klaten MDS Kudus MDS Magelang MDS Malioboro 1 MDS Malioboro 2 MDS New Armada Magelang MDS Paragon Semarang MDS Pekalongan MDS Simpang Lima MDS Singosaren MDS Solo Square SE Purwokerto East Java Galleria Delta Plaza MDS Bangkalan MDS Batu TS MDS Cito Sby MDS Gresik MDS Johar Plaza MDS Kediri MDS Madium MDS Malang Town Square MDS Pakuwon MDS Pasar Besar MDS Royal Plaza MDS Sidoarjo MDS Sidoarjo TS MDS Tunjungan Plaza Sumatra MDS Angsoduo Jambi Arthomoro Lampung Bengkulu MDS Basko Plaza Minang MDS Binjai MDS Ciputra Seraya MDS Citra Plaza MDS Grand Palladium MDS Hermes Aceh MDS International Plaza MDS Kepri MDS Medan Fair MDS Medan Mall MDS Medan Thamrin MDS Megamall Batam Centre MDS Nagoya Hill MDS Palembang Square MDS SKA

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Kalimantan MDS Balikpapan MDS Balikpapan Super Block MDS Duta Mall Banjarmasin MDS Lembuswana MDS Mall Achmad Yani MDS Pontianak MDS Q Mall Mulia Plaza Samarinda Sulawesi Brilliant Plaza Kendari GTC Tanjung Bunga MDS Gorontalo MDS Kendari MDS Mall Panakukkang 2 MDS Manado Town Square MDS Mega Mall Manado MDS Menado Trade Centre MDS Ratu Indah Makasar Bali Galleria Simpang Siur MDS Duta Plaza MDS Kuta Square Maluku MDS Ambon MDS Passo Ambon Papua MDS Jayapura

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CORPORATE STRUCTURE OF THE COMPANY

The Company does not currently have any subsidiaries.

HISTORY OF SHAREHOLDING STRUCTURE

Prior to 1 April 2010

Prior to 1 April 2010, MPP held 90.76% and Pacific Asia Holdings Ltd held 7.24% of the MDS’ issued share capital. The remaining 2% of the issued share capital was held by the public.

Pre-acquisition structure

Pacific Asia MPP Holdings Ltd Public

91% 7% 2%

MDS

Acquisition by PT Meadow Indonesia on 1 April 2010

On 1 April 2010, PT Meadow Indonesia (“MI”), an entity indirectly owned and controlled by the CVC Funds acquired 98% of MDS’ issued share capital from MPP and Pacific Asia Holdings Ltd (the “Acquisition”). The consideration for the Acquisition of MDS was at a price of Rp2,705.33 per Share. Following completion of the Acquisition, a mandatory tender offer was made by MI in respect of the 2% of the issued share capital of MDS that was held by the public. Upon completion of the mandatory tender offer on 7 May 2010, MI held 98.15% of MDS’ issued share capital.

The shareholding structure of MDS upon completion of the mandatory tender offer on 7 May 2010 was as follows:

MAC

100%

0.0002% ACC

99.9998%

MI Public

98.15% 1.85%

MDS

Meadow Asia Holdings Limited (“MAH”), an investment holding company incorporated in the Cayman Islands, was capitalised by the CVC Funds (acquiring 80% of MAH’s share capital) and Salween (an affiliate of GIC) (acquiring 20% of MAH’s share capital), for the purpose of the Acquisition and to enable GIC to co-invest alongside the CVC Funds in the Acquisition.

At the time of the Acquisition, MAC was owned by MAH. PT Matahari Pacific (“MP”) (formerly a subsidiary of MPP), became a shareholder in MAC after MPP reinvested part of its proceeds from the Acquisition in MAC to acquire 20% of the ordinary shares in MAC’s issued share capital through MP. MPP subsequently transferred its entire interest in MP to Multipolar.

After the Acquisition, certain members of MDS management (“Management Shareholders”) became shareholders in MAC, having acquired shares from MAH as part of a management investment programme.

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MAC wholly owns Asia Color Company Limited (“ACC”), an investment holding company incorporated in the Cayman Islands which at the time of the Acquisition, wholly owned MI. MI was a dormant Indonesia- incorporated company which was acquired on 17 February 2010 by MAC and ACC for the purpose of the acquisition of MDS.

Merger between MI and MDS on 30 September 2011

On 30 September 2011, MI and MDS merged, with MDS remaining as the surviving entity. The shareholding structure of MDS following the merger was as follows:

MAC

100%

0.0001% ACC

Public

1.85% 98.1499%

MDS

Shareholding structure prior to the 2013 Shareholder Reorganisation

The following chart shows the full shareholding structure (including entities above MAC) of the Company immediately prior to the 2013 Shareholder Reorganisation (as defined below).

CVC Funds

100%

Salween Investment Pte Ltd ACH Multipolar (an affiliate of GIC) 20% 80% 100%

Management of MAH MP MDS

77.6% 20% 2.4%

MAC

0.0001% 100%

Public ACC

1.85% 98.1499%

MDS

In addition to the ordinary shareholdings shown in the table above, MAH and MP respectively held 79.3% and 20.7% of the preferred shares in MAC. In addition, MP held warrants exercisable into ordinary shares of MAC. These securities represented additional investments by the security holders that offered additional economic exposure to MDS and which adjusted the security holders’ effective ownership interest in MDS.

2013 SHAREHOLDER REORGANISATION

On 8 March 2013, ACC, MAC, Multipolar and MP entered into a reorganisation agreement (the “Reorganisation Agreement”) so as to implement a simplification of the shareholding structure above MDS (the “2013 Shareholder Reorganisation”).

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Under the 2013 Shareholder Reorganisation, which completed on 8 March 2013, Multipolar acquired a direct shareholding in MDS representing in aggregate 24.9% of MDS’ issued share capital from ACC. In consideration of this, MAC repurchased all of the equity interests in MAC (being ordinary shares, preference shares and warrants) held by MP.

The consideration for the 2013 Shareholder Reorganisation was at a price derived by reference to the book value of ACC’s Shares in MDS (and therefore at a discount to the last traded Share price prior to pricing of the Offering).

A summarised version of the shareholding structure above MDS immediately prior to completion of the Offering is shown below:

(1)(2) MAH Management Shareholders Public Multipolar through through MAC and ACC(1) MAC and ACC

1.85% 71.42% 24.90% 1.83%

MDS

(1) MAH’s and Management Shareholders’ effective interests in MDS are based on their holding of ordinary and/or preferred shares in MAC. (2) The shareholdings above MAH are unchanged from that existing before the 2013 Shareholder Reorganisation as set out in the preceding diagram.

The shareholding structure above MDS immediately after completion of the Offering assuming the Over- allotment Option is exercised in full:

MAH(1) Management Shareholders Public through Multipolar through MAC and ACC(1) MAC and ACC

47.85% 30.71% 20.48% 0.96%

MDS

(1) MAH’s and Management Shareholders’ effective interests in MDS are based on their holding of ordinary and/or preferred shares in MAC, assume that ACC and MAC have distributed their net proceeds from the Offering to MAH and the Management Shareholders, and are subject to variation by no more than one percentage point when the final transactions costs in connection with the Offering are confirmed.

After completion of the Offering, and subject to applicable law, ACC may distribute all of its Shares in MDS to MAC. ACC has the ability to novate the Cooperation Agreement (described below) to MAC if such distribution occurs.

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SHAREHOLDER ARRANGEMENTS

Multipolar

Upon completion of the Offering, the existing shareholders’ agreement between, amongst others, ACC, Multipolar, MP, MAH and MAC will be terminated pursuant to a termination deed entered into between the parties dated 8 March 2013. ACC and Multipolar have entered into a new cooperation agreement (as described below) which will become effective upon completion of the Offering (the “Cooperation Agreement”).

The Company understands that the Cooperation Agreement between ACC and Multipolar contains provisions with respect to their respective investments in MDS including the following:

1. Market Coordination. ACC and Multipolar will give written notice to the other if it wishes to sell all or part of its Shares. If the other party wishes to participate in the sale they shall enter into arrangements for a joint sell down. If the other party does not wish to sell down it will agree to a lock up undertaking for a period after the sale.

2. Transactions with ACC and Multipolar or their affiliates. ACC and Multipolar agree to procure that transactions between (i) them and their affiliates and (ii) MDS will be on an arm’s length basis and on fair and reasonable commercial terms. Any Director or Commissioner nominated or appointed by ACC or Multipolar shall, unless ACC and Multipolar mutually agree, be directed to, and ACC and Multipolar themselves shall, abstain from voting on all resolutions relating to such transactions.

3. Board of Commissioners. ACC and Multipolar agree to exercise their voting rights in MDS to procure that, subject to applicable laws, the Board of Commissioners of MDS shall comprise a maximum of six Commissioners of which two shall be Independent Commissioners. ACC and Multipolar agree that they will vote to procure that (i) Multipolar may nominate one Commissioner and one Independent Commissioner of MDS and (ii) ACC may nominate two Commissioners and one Independent Commissioner of MDS. If the shareholding interest of Multipolar or ACC changes, the number of Commissioners and Independent Commissioners that they may each procure to appoint will be varied to reflect such change.

4. Board of Directors. ACC and Multipolar agree to exercise their rights in MDS to procure that, subject to applicable laws, the Board of Directors of MDS shall comprise five Directors (or such number as ACC and Multipolar may agree) of which one shall be a non-affiliated director. ACC and Multipolar agree that they will vote to procure that (i) Multipolar may nominate two Directors and (ii) ACC may nominate three Directors. If the shareholding interest of Multipolar or ACC changes, the number of Directors that they may each procure to appoint will be varied to reflect such change.

5. Confirmation of Independence. ACC and Multipolar have agreed and confirmed that the arrangements under the Cooperation Agreement do not make them parties acting in concert under Indonesian law. The Directors and Commissioners nominated by Multipolar shall have no special right or ability to influence the decisions of the Board of Directors or Commissioners (as applicable). The rights of appointment or removal of Directors or Commissioners by Multipolar are not intended by Multipolar to control the Company but only to protect its minority interest in MDS.

6. Termination. The Cooperation Agreement will terminate, amongst other reasons, if either ACC or Multipolar cease to hold at least 10% of the Shares or if any other shareholder holds an interest in more Shares in the Company than held by ACC and Multipolar and their affiliates in aggregate.

GIC and CVC

In addition, the Company also understands that the entities that hold the interests of GIC and the CVC Funds in MAH, and MAH, have entered into a shareholders’ agreement in respect of the governance of MAH and its interests in Shares in MDS. This agreement provides GIC with customary minority protections in relation to MAH and certain veto rights.

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MAH, MAC and the Management Shareholders

The Management Shareholders are party to a shareholders’ agreement with MAH and MAC (the Management Shareholders’ Agreement). The Management Shareholders’ Agreement, as amended, contains provisions with respect to the Management Shareholders’ investments in MDS including the following:

1. Restriction on disposal of MDS Shares by Management Shareholders. Other than transferring their MAC shares to affiliates or family members, unless otherwise agreed by MAH, the Management Shareholders are unable to dispose of their shares in MAC or their indirect interest in MDS Shares other than when selling in parallel with MAH or if required to transfer by MAH pursuant to its drag- along right (as described below).

2. Management Shareholders tag-along rights (MAC shares). Management Shareholders have a pro rata right to participate in any sale by MAH of its shares in MAC.

3. Management Shareholders tag-along rights (MDS shares). If MAC sells part of its interest in MDS Shares, a Management Shareholder can elect to decrease his indirect interest pro rata by participating in a buy back of his shares in MAC or retain his existing interest by not participating in such buy back.

4. Drag-along. MAH has the right to drag the Management Shareholders into a sale either (a) by selling all of its shares in MAC and requiring the Management Shareholders to sell (at the election of MAH) all or part of their shares in MAC; (b) by procuring that MAC sells more than MAH’s direct or indirect interest in MDS Shares and dragging the Management Shareholders on a pro rata basis to the extent that insufficient Management Shareholders wish to tag into the sale; (c) by procuring that MAC sells all of its direct or indirect interest in MDS Shares and using the proceeds to pay a dividend and buy back all of the shares held by MAH and the Management Shareholders in MAC.

5. Leaver provisions. If a Management Shareholder ceases to be an employee of the Company for a good leaver reason (death, serious illness, permanent disability, termination without cause (including the Management Shareholder’s service contract expiring), any other reason determined by the board at its discretion) he will be entitled to retain his shares in MAC. If a Management Shareholder ceases to be an employee of the Company for any other reason, MAH may acquire his shares in MAC at the lower of cost and fair value.

6. Restrictive covenants. Management Shareholders are subject to certain customary non-compete and non-solicitation provisions.

7. Term. The Management Shareholders’ Agreement remains in effect as long as MAC continues to exist, or it is otherwise terminated.

SHAREHOLDERS OF THE COMPANY

The Company’s authorised share capital is Rp486,114,048,000 divided into 3,911,120,640 Shares and the Company’s issued share capital is 2,917,918,080 Shares consisting of 6,168,960 type A Shares with a nominal value of Rp5,000 per share, 259,096,320 type B Shares with a nominal value of Rp350 per share and 2,652,652,800 type C Shares with a nominal value of Rp100 per share. Each of these types of Shares is fungible with each other and trade on the IDX under the symbol of “LPPF”.

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The following table sets out certain information with respect to the ownership of the Shares as at immediately before and immediately following completion of the Offering.

Immediately following completion of the Offering Immediately before (Assuming the Over- (Assuming the Over- completion of the allotment Option is not allotment Option is Offering exercised) exercised in full) Number of %of Number of %of Number of %of Name of Shareholder Shares interest Shares interest Shares interest ACC...... 2,137,373,131 73.25 1,099,235,131 37.67 924,159,631 31.67 MAC...... 6,847 0.00 6,847 0.00 6,847 0.00 Multipolar ...... 726,561,500 24.90 597,529,500 20.48 597,529,500 20.48 Public ...... 53,976,602 1.85 1,221,146,602 41.85 1,396,222,102 47.85

Multipolar

Multipolar is an Indonesia-based investment holding company listed on the Indonesia Stock Exchange (symbol: MLPL). The Company’s business segments are information technology, retail, multimedia and other services.

The beneficial owners (as defined by Rule 13d-3 under the US Exchange Act) of the Shares in MDS held by ACC are the CVC Funds, GIC and the Management Shareholders. The following table sets out their beneficial ownership (as defined by Rule 13d-3 under the US Exchange Act) immediately before and immediately following completion of the Offering.

Immediately following completion of the Offering(3) (Assuming the (Assuming the Immediately before Over-allotment Over-allotment completion of the Option is not Option is Offering exercised) exercised in full) Effective % of Effective % of Effective % of Name of beneficial owners of MDS shares held through ACC interest in Shares interest in Shares interest in Shares CVC Funds ...... 57.13 29.24 24.57 GIC...... 14.28 7.31(2) 6.14(2) Management Shareholders(1) ...... 1.83 1.12 0.96

(1) The beneficial ownership interests set out above are based on Management Shareholders’ holding of ordinary shares in MAC. (2) This interest does not include a holding of approximately 0.8% which GIC is purchasing as a Cornerstone Investor nor its holding of approximately 0.9% which it is purchasing as part of the Offering. (3) Those interests assume that ACC and MAC have distributed ACC’s net proceeds from the Offering to MAH and the Management Shareholders, and are subject to variation by no more than one percentage point when the final transaction costs in connection with the Offering are confirmed.

The CVC Funds

The CVC Funds are private equity funds that invest in companies which demonstrate the potential for growth in value. The CVC Funds control a broad portfolio of businesses which operate in a wide range of different sectors. The CVC Funds do not actively carry on any other business activities.

GIC

GIC is one of the largest investment management organisations in the world, with over 1,000 people, investing well over US$100 billion in multiple asset classes in more than 40 countries. GIC is wholly owned by the Government of Singapore. GIC manages the funds on behalf of the Government of Singapore and the Monetary Authority of Singapore. Salween Investment Pte Ltd is an affiliate of GIC.

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SELLING SHAREHOLDERS

The following table sets out certain information with respect to the ownership of the Shares and interests in the Shares of each Selling Shareholder as at immediately before and immediately following completion of the Offering.

Number of Shares/interests Number of in Shares to be Shares/interests sold by Selling in Shares held Shareholder Immediately following completion of the Offering(4) immediate (Assuming the before Over-allotment (Assuming the (Assuming the completion of Option is not Over-allotment Option Over-allotment Option the Offering exercised) is not exercised) is exercised in full) Name of %of %of Shareholder(1)(3) Description (Shares) (Shares) (Shares) interest (Shares) interest ACC ...... Corporation 2,137,373,131 1,038,138,000 1,099,235,131 37.67 924,159,631 31.67 Multipolar ...... Corporation 726,561,500 129,032,000 597,529,500 20.48 597,529,500 20.48 Michael Remsen ...... Director and CEO 5,885,088 2,240,507 3,644,581 0.12 3,062,113 0.10 Bunjamin Jonatan Mailool ...... President Director 7,760,556 3,987,710 3,772,846 0.13 3,169,885 0.11 Christian Kurnia ...... Member of Board of Management 7,760,556 2,954,515 4,806,041 0.16 4,037,952 0.14 Henry Jani Liando ...... Commissioner 5,173,704 2,658,473 2,515,231 0.09 2,113,257 0.07 Martin Laihad ... Member of Board of Management 517,370 196,968 320,403 0.01 269,197 0.01 Sunny Setiawan...... Member of Board of Management 2,586,852 984,838 1,602,014 0.05 1,345,984 0.05 Rene Wing Ming Mang ...... Commissioner 3,492,250 1,329,532 2,162,719 0.07 1,817,078 0.06 William Travis Saucer ...... Commissioner 3,492,250 1,329,532 2,162,719 0.07 1,817,078 0.06 Others ...... Individuals(2) 12,964,785 4,935,812 8,028,973 0.28 6,745,802 0.23

Notes: (1) The members of management and other individuals listed above are shareholders in MAC. Their beneficial interests set out above are based on their holding of ordinary shares in MAC. Certain of their shares in MAC will be bought back with the proceeds from the Offering that MAC receives by way of distribution from ACC. Participation in the share buyback allows the Management Shareholders to dispose of part of their indirect interest in Shares in MDS through the Offering. The Chief Financial Officer of MDS, although one of the Management Shareholders, will not be participating in the share buyback and will therefore not be selling any of his indirect interests in the Shares to which he is entitled in the Offering. (2) Individuals consists of 32 persons each of whom is employed by MDS. (3) The business address for each of the Managers, Directors and Commissioners is that of the MDS headquarters in Jakarta, being Menara Matahari 9th - 15th Floor, Jl. Boulevard Palem Raya No. 7, Lippo Karawaci 1200, Tangerang 15811 – Indonesia. (4) These interests assume that ACC and MAC have distributed ACC’s net proceeds from the Offering to MAH and the Management Shareholders, and are subject to variation by no more than one percentage point when the final transaction costs in connection with the Offering are confirmed.

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OVERVIEW

This section includes a summary of the Company’s transactions with the entities that are considered to be affiliates as defined in Form 20-F under the US Exchange Act. This includes transactions that are affiliated party transactions and conflict of interest transactions under Indonesian regulations but also includes transactions that are not so treated under Indonesian regulations.

SUMMARY OF RELEVANT INDONESIAN REGULATIONS

Under the Decision of Chairman of BAPEPAM-LK on Regulation No. IX.E.1 concerning Transaction with Affiliated Parties and Conflict of Interest on Certain Transaction (“BAPEPAM-LK Regulation No. IX.E.1”), there are two types relevant transactions: affiliated party transactions and conflict of interest transactions.

Affiliated party transactions

An affiliated party transaction under Indonesian law is a transaction conducted between a company listed on an Indonesian stock exchange or a company/entity controlled by it, with an affiliate of the company or an affiliate of a member of its board of directors or board of commissioners or a substantial shareholder (being a shareholder who owns at least 20% of the issued shares in the company or such other lower threshold as determined by OJK).

Under Law 8 of 1995 on Capital Markets, amongst other relationships, each of the following relationships between two entities or persons will deem them to be “affiliates” of each other:

Š two companies in which one or more members of the boards of directors or boards of commissioners are the same;

Š a company and a party that directly or indirectly controls or is controlled by that company;

Š two companies that are controlled directly or indirectly by the same party; or

Š a company and its substantial shareholders.

The entry into an affiliated party transaction does not require the approval of a listed company’s independent shareholders. Generally, such transactions, including detailed information and a summary appraisal report regarding the transaction, must be announced to the public and the evidence of such announcement must be reported to OJK along with the supporting documents (including a fairness opinion from an independent appraiser) within two business days from the date of the transaction, unless an exemption is available. If an exemption is available, the transaction will either be: (i) reported to OJK but not announced to the public; or (ii) not required to be disclosed and reported to OJK (as applicable). Transactions that are required to be only reported to OJK include, among others: (i) any transaction concluded to satisfy any obligation under applicable laws and regulations; (ii) any transaction the value of which is less than 0.5% of the total paid-up capital of the listed company and does not exceed Rp5 billion; or (iii) any transaction between the company and its controlled entity where the company owns at least 99.0% shares in such entity. Transactions that are not required to be disclosed and reported to OJK include, amongst others: (i) any transactions that constitute the core business of the listed company or its controlled subsidiaries, or any transactions that support the core business of the company or its controlled subsidiaries; or (ii) ongoing transactions that have occured before the initial public offering of the listed company or before the submission of the registration statement that has been disclosed in the initial public offering prospectus, provided that the terms and conditions of the transactions have not changed in a manner that may cause loss to the listed company.

Conflict of interest transactions

Any affiliated party transaction by a public company listed on an Indonesian stock exchange which entails a conflict of interest must be approved by independent shareholders who do not have a conflict of interest in the proposed transaction and certain disclosures must be made to the shareholders prior to the general meeting of shareholders held to approve such conflict of interest transactions. A “conflict of interest” is defined in OJK regulations to mean a conflict between the economic interests of a publicly listed company, on the one hand, and the personal economic interests of any member of the company’s board of commissioners, board of directors or a substantial shareholder which has the potential to result in losses to the company.

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THE COMPANY’S AFFILIATED PARTIES

ACC

As of immediately prior to the Offering, ACC owns 73.25% of the issued Shares. Immediately following completion of the Offering, ACC will own: (i) 37.67% of the issued Shares assuming the Over-allotment Option is not exercised; or (ii) 31.67% of the issued Shares assuming the Over-allotment Option is exercised in full. ACC is and will therefore, continue to be a substantial controlling shareholder and affiliated party of the Company.

MAC

As of immediately prior to, and immediately following completion of, the Offering, MAC owns 100% of ACC. MAC is and with therefore, continue to be an affiliate of the Company immediately following completion of the Offering.

MAH

As of immediately prior to, and immediately following completion of the Offering, MAH owns 77.6% of the ordinary shares in MAC. MAH is and will therefore, continue to be an affiliate of the Company immediately following completion of the Offering.

The CVC Funds

As of immediately prior to the Offering, the CVC Funds are the beneficial owner (as defined by Rule 13d-3 under the US Exchange Act) of approximately 57% of the issued Shares. Immediately following completion of the Offering, the CVC Funds will be the ultimate beneficial owner of: (i) 29.24% of the issued Shares assuming the Over-allotment Option is not exercised; or (ii) 24.57% of the issued Shares assuming the Over-allotment Option is exercised in full. The CVC Funds are and will therefore, collectively, continue to be an indirect substantial shareholder and treated as an affiliate of the Company immediately following completion of the Offering.

Multipolar

As of immediately prior to the Offering, PT Multipolar Tbk (“Multipolar”) is the owner of 24.9% of the issued Shares. Immediately following completion of the Offering, Multipolar will own: (i) 20.48% of the issued Shares assuming the Over-allotment Option is not exercised; or (ii) 20.48% of the issued Shares assuming the Over- allotment Option is exercised in full. For the purposes of Form 20-F under the US Exchange Act, Multipolar is an affiliate of the Company. Immediately following completion of the Offering, Multipolar is expected to continue to be treated as an affiliate of the Company for the purposes of US securities laws.

GIC

As of immediately prior to the Offering, GIC is the beneficial owner (as defined by Rule 13d-3 under the US Exchange Act) of approximately 14% of the issued Shares and is treated as an affiliated party of the Company under Form 20-F of the US Exchange Act. Immediately following completion of the Offering, GIC will be the beneficial owner of: (i) approximately 9.0% of the issued Shares assuming the Over-allotment Option is not exercised; or (ii) approximately 7.8% of the issued Shares assuming the Over-allotment Option is exercised in full. This interest includes a holding of approximately 0.8% which GIC is purchasing as a Cornerstone Investor and its holding of approximately 0.9% which it is purchasing as part of the Offering.

MPP

MPP is a multi-format retailer listed on the Indonesia Stock Exchange (symbol: MPPA). MPP is part of the Lippo Group, a conglomerate in Indonesia which operates across Asia in a wide range of industries including real estate, healthcare, hospitality, infrastructure, and retail.

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MPP and the Company have the following members of the boards of directors and boards of commissioners in common:

Š Jonathan Limbong Parapak is an Independent Commissioner of the Company and an independent commissioner of MPP; and

Š Bunjamin J.Mailool is the President Director of both the Company and MPP.

Accordingly, under Indonesian regulations, MPP is and will continue to be an affiliated party of the Company immediately following completion of the Offering.

Under Form 20-F of the US Exchange Act, other members of the Lippo Group (including PT Lippo Karawaci Tbk (“Lippo Karawaci”)) are also treated as affiliated parties of the Company. For the purposes of Indonesian law, regulations and accounting practices, other members of the Lippo Group (unless otherwise stated) is not and, immediately following completion of the Offering, will not be an affiliate of the Company.

Lippo Malls Indonesia Retail Trust (“LMIR REIT”)

LMIR REIT is a real estate investment trust listed on the Singapore Stock Exchange. Mr Mailool is a President Director of the Company and a non-executive director of LMIR REIT. Accordingly, LMIR REIT is an affiliated party of the Company under the Indonesian regulations.

PT VisioNet Internasional (“VisioNet”)

As VisioNet is an affiliated company of the Lippo Group, VisioNet is considered to be an affiliated party of the Company under Form 20-F of the US Exchange Act. For the purposes of Indonesian law, regulations and accounting practices, Visionet is not and, immediately following completion of the Offering, will not be an affiliate of the Company.

PT Jones Lang Lasalle Indonesia (“Jones Lang”)

Jones Lang is an affiliated party of the Company under Indonesian regulations as a Director of the Company has a family relationship with a commissioner of Jones Lang.

SUMMARY OF AFFILIATED TRANSACTIONS

Prior to the acquisition of MDS by MI on 1 April 2010, MPP held 90.76% of the Shares in MDS, and prior to October 2009, the Matahari department store business operated as a division within MPP itself. The acquisition by MI in April 2010 marked a change of control from MPP to MI.

Property leases

The Company’s stores are leased from a combination of: (i) various parties not affiliated with the Company; (ii) Lippo Group companies (being MPP and Lippo Karawaci); and (iii) LMIR REIT, a listed Singapore REIT, managed by a Lippo Group company. Lease arrangements with affiliated parties are entered into on an arms’ length basis. In 2012, stores leased from affiliated parties accounted for 33% of total lease payments. The table below shows the breakdown of the Company’s store leases according to the above categories as at the Latest Practicable Date.

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With the exception of approximately 2% of the Company’s stores that have leases denominated in US dollars, all of the Company’s lease arrangements are denominated in Rupiah.

Of the total 116 leases, 42 (36%) provide for a variable rent and 74 (64%) provide for a fixed rent. The Company has two types of lease arrangements: (i) those with fixed rent arrangements based on a charge per square metre with escalations following periodic contract periods; and (ii) those based on variable rent that are pre-set as a percentage of the store’s Gross Sales, with or without minimum rents (including certain leases which are governed by a standard set of terms previously renegotiated on a blanket basis – see below).

At the time of the acquisition of MDS by MI in April 2010 (see Section 15 – “Corporate and Shareholding Structure and Reorganisations”), the existing lease arrangements with MPP and Lippo Karawaci, including those transferred to the LMIR REIT, were renegotiated on a blanket basis such that rent was governed on the same terms. These arrangements impact 27 leases (comprising 23% of total outstanding leases). Under the terms of these agreements, rent is payable as a percentage of Gross Sales equal to the percentage derived from total rent paid in respect of stores leased from third parties divided by total sales at such stores leased from third party in the prior calendar year, further divided by 0.9, and subject to a minimum rent equal to the prior years’ actual rent paid. Subsequent stores leased from MPP, Lippo Karawaci or LMIR REIT following the acquisition in April 2010 have been and continue to be entered into on the basis of individual, separately negotiated leases which may be either fixed or variable depending on those negotiations.

0-5 years 6-10 years >10 years Total

Unrelated parties ...... 15 20 39 74 MPP and Lippo Karawaci ...... 2 1 20 23 LMIR REIT ...... 11 1 7 19 Total ...... 28 22 66 116 Percentage of MDS’ 116 stores ...... 24% 19% 57% 100%

In practice the Company is likely to enter into discussions with a view to extending a lease where this suits the Company’s strategic plans. See also Section 14 – “Business – Store Leases”.

The Company has also entered into a lease agreement for its central distribution centre with MPP under which the Company has leased a total floor area of 26,784 square metres. The rent expense for its distribution centre in 2010, 2011 and 2012 was Rp1.3 billion, Rp1.4 billion and Rp1.5 billion respectively.

The Company has also entered into a lease agreement with MPP for its head office building in Jakarta, under which the Company has leased a total floor area of 5,876 square metres. The rent expense for the head office building in 2010, 2011 and 2012 was Rp10.2 billion, Rp9.4 billion and Rp9.3 billion respectively.

IT Service Contract

The Company has an existing IT service contract with VisioNet, under which VisioNet provides the Company with IT services. VisioNet is a leading IT service provider in Indonesia with a client base which includes blue chip Indonesian and multinational clients. The Company’s contract with VisioNet will expire on 1 July 2015. The IT service fees to VisioNet in 2010, 2011 and 2012, was Rp10.4 billion, Rp11.3 billion and Rp12.7 billion respectively.

Insurance

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Purchase of IT hardware

For the purposes of Form 20-F under the US Exchange Act, Multipolar is an affiliate of the Company. The Company purchased IT hardware from Multipolar in 2012 at a cost of Rp8.5 billion.

Information reporting services

Pursuant to an agreement entered into at the time of the Acquisition, the Company provides certain information reporting services relating to public information on the Indonesian retail industry to MAC. In 2010, 2011 and 2012, the Company received service fees of Rp132 million, Rp480 million and Rp480 million respectively.

Property agent services

The Company entered into a Tenant Representation Agreement with Jones Lang on 12 November 2012. Under this agreement, the Company appoints Jones Lang as its non exclusive agent for the purpose of locating, evaluating, negotiating and securing retail space to be leased by the Company in the target area. The term of this agreement is 12 months.

Assistance provided in connection with the Offering

In connection with the Offering, the Company has agreed to provide assistance to the Selling Shareholders. Based on a Request for Assistance Letter dated 13 November 2012 as supplemented by a Request for Assistance Letter dated 5 December 2012 from the Selling Shareholders, the scope of assistance required by the Selling Shareholders from the Company in connection with the Offering includes:

Š to assist the Selling Shareholders and any parties involved in the Offering in their due diligence review of the Company, including the establishment of a virtual data room containing information relating to the Company which is necessary for the purpose of implementing the Offering, and to cooperate with the Selling Shareholders and any parties involved in the Offering in relation to the above due diligence process, in accordance with applicable laws and regulations;

Š to assist any parties to the Offering in the preparation of documents required for the implementation of the Offering, including but not limited to the Offering Circular and the analysts’ presentation and other marketing materials requested by the parties to the Offering;

Š to participate in analysts’ presentations, investor meetings, and/or road shows in connection with the implementation of the Offering;

Š to enter into such agreements or documents related to the Offering, including without limitation an international placement/underwriting agreement and lock-up agreement, and to provide therein or in connection therewith representations, warranties, undertakings, covenants and indemnities;

Š to make the management of the Company available to participate in all of the activities referred to above;

Š to do any and all acts necessary, including without limitation obtaining all necessary corporate and regulatory approvals, in order to carry out all matters in relation to the implementation of the Offering, in each case in accordance with applicable laws and regulations; and

Š to support the Selling Shareholders and the parties to the Offering in connection with the implementation of the Offering, including with respect to the items above, in accordance with applicable laws and regulations.

The granting of assistance from the Company to the Selling Shareholders is characterised as the granting of access to the Selling Shareholders and the parties to the Offering to material non-public information related to the Company and its business on 7 December 2012.

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Under OJK’s current policy, the grant of assistance from the Company to the Selling Shareholders constitutes an affiliated party transaction. Therefore, pursuant to Bapepam-LK Regulation No. IX.E.1, the Company is required, among other things, to (i) obtain a fairness opinion from an independent appraiser stating that the granting of assistance from the Company to the Selling Shareholders is a fair transaction, and (ii) make an announcement to the public explaining the reasoning, explanation, and consideration related to the granting of assistance within two working days of the first time the Company provides the assistance to the Selling Shareholders.

In respect of the above, the Company has obtained fairness opinion number RAO.YUHAL-B-ODN-XII/12 dated 6 December 2012 from the Public Appraiser Service Office of RAO,YUHAL & Rekan that opined that the granting of assistance by the Company to the Selling Shareholders is a fair transaction, and the Company has made the required announcement in a national newspaper on 10 December 2012. A further fairness opinion was obtained on 25 March 2013 and an additional announcement will be made by the Company in accordance with Indonesian regulations.

ARMS LENGTH TERMS AND CONTROLS

Management believe that all transactions (described above) are on arms length terms and are all in the best interests of the Company. Store leases are negotiated on an arms length basis by the Company’s dedicated real estate team, with final approval for the terms of such leases having to be obtained from the Company’s real estate committee which consists of five members of senior management including the Company’s Chief Executive Officer and Chief Financial Officer.

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In accordance with Indonesian law, the Company has both a Board of Commissioners and a Board of Directors. The two boards are separate and no individual may serve as a member of both boards. The rights and obligations of each member of the Board of Commissioners and the Board of Directors are regulated by the Articles of Association, the decisions of Shareholders in general meetings, the Company Law, BAPEPAM-LK regulations and IDX regulations. The Company also has a Board of Management comprising the Company’s senior management team.

The members of the Board of Directors and Board of Commissioners are appointed by the Shareholders at a general meeting of Shareholders. Under the Articles of Association, the Company’s Board of Directors and Board of Commissioners are elected from the date of the appointment until the next annual general meeting of shareholders. Under the Articles of Association, the Board of Directors must consist of at least two members, one of which may be appointed as a President Director. In addition, under IDX listing regulations, one member of the Board of Directors must be a non-affiliate director. The Board of Commissioners must have at least two members, including an independent commissioner and one of the commissioners may be appointed as a President Commissioner. At least 30% of the members of the Board of Commissioners must be independent commissioners. As of the date of this Offering Circular, the Company has only two Independent Commissioners out of a total of seven Commissioners (although Travis Saucer has resigned as a Commissioner and once this resignation is effective the situation will be regularised). See Section 17 – “Corporate Governance – Board of Commissioners”. See Section 26 – “Indonesian Capital Markets” for the criteria a person is required to satisfy to be a non-affiliate director and an independent commissioner.

Based on the Articles of Association of the Company, two members of the Board of Directors can legally bind the Company, except in respect of the following actions which require written approval from the Board of Commissioners:

(a) to borrow or lend certain amount of monies on behalf of the Company which amount will be determined by a meeting of the Board of Commissioners from time to time (excluding the debit of certain amount of monies from the existing credit facilities and in the ordinary course of the Company’s business activities);

(b) to purchase/sell or receive/release immovable assets owned by the Company, except for the purpose of the Company’s business activities;

(d) to invest or divest capital in other companies; and

(e) to assign, release rights in respect of, or pledge up to 50% of the Company’s assets in one financial year in a transaction or a series of transactions.

BOARD OF MANAGEMENT

The Board of Management comprises ten members: one Chief Executive Officer, one Chief Financial Officer and eight directors (each responsible for different areas of the Company’s business). The Board of Management act on behalf of and for the Board of Directors in relation to certain managerial tasks and duties. The Board of Management is responsible for developing and implementing the Company’s operational and strategic plans.

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The current members of the Board of Management are as follows: Name Age Position

Michael Remsen ...... 66 Chief Executive Officer

Richard Gibson ...... 50 Chief Financial Officer

Christian Kurnia ...... 46 Merchandising & Marketing Director

Keith Jones...... 65 Logistics Director

Martinus Laihad ...... 65 Procurement, Systems & Procedures Director

Raden Soeparmadi ...... 71 Audit & Social Affairs Director

Sunny Setiawan ...... 47 Store Operations Director

Irwin Abuthan ...... 41 Store Planning & Development Director

Andre Rumantir ...... 60 Human Resources Director

Miranti Hadisusilo ...... 42 Corporate Secretary & Legal Director

Michael Remsen was appointed as the Company’s vice-president director in June 2012 and as the Company’s Chief Executive Officer in 2011. He joined the Company in 2009. He has worked for over 35 years in the United States retail industry. In particular, he has held merchandise positions with Allied Stores Corp (1975 – 1987), and was vice president divisional merchandise manager and vice president for planning at Macy’s West (1987 – 1991), executive vice president of merchandising at SteinMart (1992 – 2000), vice president of merchandising at JCPenney (2001 – 2006) and executive vice president and chief merchandising officer at Gordmans Inc (2006 – 2009). Mr Remsen holds a Bachelor of Science (Advertising) from the University of Florida, United States and a Master of Arts (Distributive Education) from the University of South Florida, United States.

Richard Gibson joined the Company to take up the role of Chief Financial Officer in 2010. He has over 25 years experience in the retail industry working in both Europe and the United States. Mr Gibson worked for Debenhams department stores in the United Kingdom (1985 – 1987), and was European Director of Finance, based in London, and subsequently Vice President of Finance, for Warner Bros Studio Stores based in the United States (1989 – 1997). In addition Mr. Gibson was the retail global controller for Nike’s worldwide retail division, Chief Financial Officer of David’s Bridal, a division of May department stores (2001 – 2006) and Chief Financial Officer of Orchard Supply Hardware, a division of Sears (2006 – 2008). Mr Gibson’s professional qualifications include membership of the Association of Chartered Certified Accountants and the Institute of Internal Auditors.

Christian Kurnia was appointed as the Company’s Merchandising & Marketing Director in 2002. He started his career at PT Metrodata Electronics (1992 – 2002) and his last position there was as distribution director. Mr Kurnia was previously involved with marketing leading technology brands including Acer, Seagate Technology, Epson, Creative Technology and Compaq in Jakarta with PT Metrodata Electronic as the main distributor for those brands. He has received awards for Hundred Percent Achiever (1993 – 1998) and Business Management Award (1999 – 2000) from PT Metrodata Electronics. Mr. Kurnia has a Bachelor’s degree from Bandung Institute of Technology, Indonesia.

Keith Jones joined the Company as its Logistics Director in 2005, after serving the Company’s distribution and logistical aspects as a senior consultant from PT Exel Indonesia since 2004. Mr Jones’ 35 year professional career has been focused on distribution and supply chain management. He previously worked for PT Exel Indonesia, ASDA Superstores, Buck & Hickman Ltd, Hanson Transport Ltd, Cougar Express/BMW Singapore and TNT Logistic (M) Sdn Bhd. He is a member of the UK Institute of Transport and Logistics.

Martinus Laihad was appointed as the Company’s Procurement, Systems & Procedures Director in 2006. He joined the Company in 2006. Prior to working at the Company, he worked at Lippo companies (1990 – 2005) and MPP (2005 – 2006). Mr. Laihad graduated from the Technical University, Berlin, Germany.

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Raden Soeparmadi was appointed as the Company’s Audit & Social Affairs Director in 2010. He joined the Company in 2008. He is a professional executive with over 40 years experience in corporate finance, asset management, real estate and general management. He began his career at Citibank NA (1969 – 1978) and was subsequently appointed as managing director of Finconesia Financial Company. He joined the Lippo Group in 1990 and has held several director level positions in various companies within the Lippo Group: Bahari Bank, Lippo Cikarang, Lippo Land, Lippo Bank and his last position was as a director of PT Gowa Makassar Tourism Development Tbk. He holds a BA in English literature from IKIP Malang, Indonesia.

Sunny Setiawan joined the Company as its Store Operations Director in 2003. She is responsible for the overall operations of all of the Company’s stores. She also serves as the liaison officer for IGDS (Intercontinental Group of Department Stores). In the course of her career, she has held various positions in a number of companies including PT Johnsons & Sons (1992), Duty Free Shoppers (1994), and PT Mitra Adiperkasa Tbk (1993 and 1997). She holds a Bachelor degree from the Department of Economics, Universitas Tarumanegara, Indonesia and a Masters degree in Retailing from Stirling University, United Kingdom.

Irwin Abuthan joined the Company as its Store Planning & Development Director in 2010. From 2002 to 2010, he held various positions in the Lippo Group (food divisions) including as its director of planning and development. He began his career at Bank Credit Lyonnais Indonesia (1995 – 1997). He has also worked as the manager of corporate finance and corporate banking at American Express Bank Ltd (1997 – 1999) and as vice president in the asset management division of the Indonesian Investment Banking Restructuring Agency (IBRA) (1999 – 2002). Mr Abuthan holds a Bachelor of Commerce (Banking & Finance) from Curtin University of Technology, Western Australia.

Andre Rumantir was appointed as a Director in June 2012. He joined the Company in October 2004, was appointed HR director (corporate division) of MPP in 2005 and appointed to the Company’s Board of Management in June 2011. Prior to joining the Company, he spent 24 years working in PT International Nickel Indonesia Tbk (1978 – 1986) and PT Goodyear Indonesia Tbk (1986 – 2002). He holds a Bachelor’s Degree (Mechanical Engineering) from Trisakti University, Indonesia and a MBA from Greenwich University, Hawaii.

Miranti Hadisusilo was appointed as Corporate Secretary & Legal Director of the Company in 2010. She joined the Company in 2010 and has more than 15 years of experience as a Corporate Secretary. She started her career as a senior auditor in Prasetio, Utomo & Co (an Arthur Andersen affiliate) (1992 – 1995). Between 1995 and 2010, she worked at PT Tunas Ridean Tbk, a Jardine Matheson associate company, where she set up and oversaw the corporate secretary, legal, corporate communications, investor relations, customer relations and corporate departments. At present, she is an audit committee member of PT Selamat Sempurna Tbk, a member of the Indonesian Institute of Corporate directorship, a committee member of Asosiasi Emiten Indonesia (the Indonesian Listed Company Association) and general secretary of the Indonesian Corporate Secretary Association. Ms. Hadisusilo holds an economic degree from the University of Indonesia.

BOARD OF DIRECTORS

The Board of Directors comprises six members: one President Director, one Vice President Director and four Directors. Members of the Board of Directors are appointed and removed at the general meeting by the Shareholders. The Board of Directors is responsible for the management of the Company’s business and representing the Company to the public. See Section 15 – “Corporate and Shareholding Structure – Shareholding Arrangements” for detail on existing shareholding arrangements in relation to the nomination of Directors.

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The current members of the Board of Directors are as follows:

Name Age Position

Bunjamin Jonatan Mailool ...... 49 President Director

Michael Remsen ...... 66 Vice President Director

Sigit Prasetya ...... 44 Director

JooSukKim ...... 37 Director

Wai Hoong Fock ...... 36 Director

Andre Rumantir ...... 60 Director

Michael Remsen is the non-affiliated Director of the Company.

Bunjamin Jonatan Mailool was appointed as the Company’s President Director in October 2009. He is also president director of MPP, a position he has held since January 2002. Mr Mailool worked at Citibank NA, Jakarta (1989 – 1997) in a variety of positions including vice president – head of risk management treasury. Between 1997 and 2001, he served as chief executive officer and vice president director of PT Sentul City Tbk. Mr Mailool holds a bachelor’s of science degree from the California State University, United States and a MBA from the University of Oklahoma, United States.

Michael Remsen – See description under the section headed “Board of Management” above.

Sigit Prasetya was appointed as a Director in March 2010. He is a managing partner at CVC and a member of CVC’s Asia Pacific Investment Committee. Prior to 2007, Sigit worked for Henderson Private Capital as head of South East Asia from 2006 – 2007 and Morgan Stanley from 1999 – 2006 as head of its Indonesian investment banking business. Prior to that, Mr Prasetya worked for Booz Allen Hamilton from 1996 – 1999 and Citibank, from 1991 – 1992. At present, Mr Prasetya’s directorships include Amtek Engineering Limited, Multi-Purpose Holdings Berhad, PT Link Net, and Triple Platform Sdn Bhd. Mr Prasetya holds a MBA (Dist.) from the University of New South Wales, Australia.

Joo Suk Kim was appointed as a Director in March 2010. He is a managing director at CVC and is head of its Asia financing team. Since joining CVC in 2004, Mr Kim has been based in its Seoul and Hong Kong offices and has been involved in investments across a wide range of industries spanning across most Asia Pacific countries. He currently serves as a non-executive director on the boards of a number of CVC portfolio companies, including Hong Kong Broadband Network Limited and WiniaMando Inc. Prior to 2004, Mr. Kim was a financial analyst at Seoul Z Partners, an investment firm based in Korea. Mr Kim holds a bachelor’s degree in business administration from Yonsei University, Korea.

Wai Hoong Fock was appointed as a Director in March 2010. He is a managing director at CVC. Prior to joining CVC, Wai Hoong worked as vice president at Headlands Capital Partners (2006 – 2007), Blum Capital Partners (2004 – 2006) and Morgan Stanley (Investment Banking Division) (2001 – 2004). At present, his other directorships include Magnum Holdings Sdn Bhd and PT Link Net. Mr Fock holds a master’s degree in public policy and a BA in Economics (Honors) from the University of Michigan, United States.

Andre Rumantir – See description under the section headed “Board of Management” above.

BOARD OF COMMISSIONERS

The Board of Commissioners comprises seven members: two Independent Commissioners (one of whom is the President Commissioner) and five Commissioners. Members of the Board of Commissioners are appointed and removed at the general meeting by the Shareholders.

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The Board of Commissioners advises and supervises the Board of Directors. Each member of the Board of Commissioners acts independently in fulfilling its duties and responsibilities to the Company and does not have any familial relationships, financial relationships, management relationships, and/or shareholding relationships with other members of the Board of Commissioners and/or with other members of the Board of Directors. The Board of Commissioners organises annual and quarterly meetings with the Board of Directors (supplemented by incidental meetings if deemed necessary) to facilitate communications between the two parties. See Section 15 – “Corporate and Shareholding Structure – Shareholding Arrangements” for detail on existing shareholding arrangements in relation to the nomination of Commissioners.

The current members of the Board of Commissioners are as follows:

Name Age Position

John Bellis ...... 69 President, Independent Commissioner

Jonathan L Parapak ...... 70 Independent Commissioner

William Travis Saucer ...... 60 Commissioner (has resigned as of 7 April 2013)

Roy Kuan ...... 46 Commissioner

Artapong Porndhiti ...... 38 Commissioner

Rene Mang Wing Ming ...... 61 Commissioner

Henry Jani Liando ...... 49 Commissioner

John Bellis was appointed as the Company’s President Commissioner Independent in March 2010. He previously served as the Chief Executive Officer of the Company. Since joining the Company in 2001, Mr Bellis has also previously served as Independent Commissioner and senior adviser. Mr Bellis began his career as a management trainee at John Lewis Partnership Stores, United Kingdom (1961 – 1965). He has also worked as a general manager at Booker Group, Zambia (1965 – 1970) and a general manager and managing director at Edgars Stores Ltd, South Africa (1970 – 1998). Mr Bellis is a NRDC graduate of St. Martins College, United Kingdom.

Jonathan L Parapak was appointed as an Independent Commissioner of the Company in March 2010. He joined the Company in 2000. He has held a wide range of positions including Secretary General of the Department of Tourism, Secretary General of Tourism, Post and Telecommunications (1991 – 1998), Secretary General of the Ministry of Tourism, Arts and Culture (1998 – 1999); and President Director and President Commissioner of PT. Indosat Tbk (1980 – 2000). At present, Mr Parapak is rector of Universitas Pelita Harapan and an independent commissioner of MPP. He holds a Bachelors and Masters degree as well as a Doctorate (all in Engineering) from the University of Tasmania, Australia.

William Travis Saucer was appointed as Commissioner of the Company in June 2012. He joined the Matahari Group in 2006 and previously served as the Chief Executive Officer of the Company. He has over 36 years of experience with particular expertise in merchandising and marketing in the department store business in the United States – working for companies such as Saks Inc and JCPenney. In addition, he has held the post of chief executive officer and president of the following: Parisian department stores (1999 – 2011), McRae’s department stores (1998 – 1999) and Matahari department stores (2006 – 2011). Mr Saucer holds a bachelor’s degree in Advertising from Troy University, United States. Mr. Travis has resigned as of 7 April 2013 – see below.

Roy Kuan was appointed as a Commissioner of the Company in March 2010. He is a Managing Partner at CVC and is a member of member of CVC’s Asia Pacific investment committee. Prior to joining CVC in 1999, he worked in Citicorp’s private equity division in Asia. At present, Mr Kuan’s directorships include Sun Hung Kai & Co., Nien Made Holdings, and Hong Kong Broadband Network. He serves on the board of the Asian Venture Philanthropy Network. Mr Kuan holds a BA degree from Georgetown University and a MBA from the Wharton School, University of Pennsylvania, United States.

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Artapong Porndhiti was appointed as a Commissioner of the Company in May 2011. He is also a director at CVC. Prior to joining CVC, Mr Porndhiti was a vice president at Lombard Investments Inc (2003 – 2011) and worked in Dresdner Kleinwort Wasserstein’s corporate finance division (2000 – 2003). Mr Porndhiti holds a MBA from the Sasin Graduate Institute of Business Administration, Thailand and a BA Degree (Commerce) from the University of Melbourne, Australia.

Rene Mang Wing Ming was appointed as a Commissioner of the Company in March 2010. He is presently the group chief executive officer of G2000 Apparel Limited. He has held senior positions in various large retailers over the past 20 years including chief operating officer of Trust-Mart, China (a wholly owned subsidiary of Wal-Mart) (2007 – 2008), chief administrative officer of Wal-Mart, China (2005 – 2006), country president of Wal-Mart, Korea (1998 – 2004), and chief executive officer of Seibu Department Store, Hong Kong and China (1997 – 1998). Mr Ming is a member of AICPA (American Institute of Certified Public Accountants) and graduated from the Chinese University of Hong Kong, Hong Kong.

Henry Jani Liando was appointed as a Commissioner of the Company in March 2010. He joined the Company in 2008 as director of financial and strategic planning and is responsible for formulating the Company’s strategic and long term plans. Prior to joining the Company, he held the positions of chief financial officer and treasurer of the global customer group, at Citibank NA, Indonesia. He holds a Bachelor of Engineering (Chemical Engineering) Degree from Institut Teknologi Bandung, Indonesia and a MBA (Finance) from Oregon State University, United States. Mr Liando was also a director of ACC up until 15 March 2013.

As of the date of this Offering Circular, the Company has only two Independent Commissioners out of a total of seven Commissioners. As the composition of the Company’s Board of Commissioners may not currently be consistent with an Indonesian regulatory requirement for at least 30% of its Commissioners to be independent, Travis Saucer has tendered his resignation from the Board of Commissioners on 8 March and will cease to be a Commissioner within 30 days of such notice. His resignation will result in the Company being in full compliance with this requirement. See Section 4 – “Risk Factors”.

Committees under the Board of Commissioners

There are currently two committees under the Board of Commissioners: an Audit Committee and a Nomination and Remuneration Committee. See Section 15 – ”Corporate and Shareholding Structure – Shareholding Arrangements” for detail on existing shareholding arrangements in relation to the nomination of Commissioners.

Audit Committee

The Audit Committee consists of four members: it is chaired by Jonathan L. Parapak and its other members are Rene Mang Wing Ming, Lim Kwang Tak and Loh Min Jiann. Jonathan L. Parapak and Lim Kwang Tak are independent members of the audit committee.

The Audit Committee assists the Board of Commissioners by, among other things, reviewing: (i) the Company’s financial results and other corresponding financial information; (ii) the Company’s compliance with applicable regulations; (iii) the effectiveness of the Company’s internal control and activities; and (iv) the Company’s ability to manage risks and handle customer complaints. The Audit Committee also monitors the Company’s overall performance. The Audit Committee regularly reports its findings to the Board of Commissioners. It met four times in 2012 with a 100% attendance rate.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee consists of three members: it is chaired by Sigit Prasetya and its other members are Bunjamin J. Mailool and Michael Remsen. The Nomination and Remuneration Committee is responsible for: (i) supervising the duties and responsibilities of the Directors with regard to vision and mission; (ii) developing HR policies including, but not limited to nomination, remuneration, talent management, retention, succession, training, organisation design and recruitment; and (iii) evaluating and implementing good corporate governance in relation to HR policies and the Code of Conduct.

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The Nomination and Remuneration committee prepares the Company’s remuneration policy for Commissioners, Directors and Management which is decided upon and approved by Shareholders in general meeting. The Nomination and Remuneration Committee met three times in the 2012 with a 100 % attendance rate.

ADDITIONAL OVERSIGHT COMMITTEES

The Company has three additional committees: the Real Estate Committee, the Marketing Committee and the Risk Management Committee.

Real Estate Committee

The Real Estate Committee consists of five members and is chaired by Michael Remsen. The other members are Richard Gibson, Sunny Setiawan, Martin Laihad and Irwin Abuthan. The Real Estate Committee assists the Board of Directors in monitoring the Company’s major development projects and assessing potential locations for new stores. It is responsible for:

Š supervising the implementation of the Company’s real estate expansion plans;

Š evaluating and approving new store locations in accordance with the Company’s internal investment goals;

Š monitoring the progress of all on-going property development projects in accordance with the pre- determined timeline and budget; and

Š evaluating and providing feedback on the Company’s expansion programme from planning and implementation, to on-going performance assessments.

Marketing Committee

The Marketing Committee consists of eight members and is chaired by Michael Remsen. The other members are Christian Kurnia, Sunny Setiawan, Diah Minarni, Tanty Muliawan, Dharsana Sulistijo, Tjhai A Eng and Richard Edgar. The Marketing Committee oversees the Company’s marketing programmes. It is responsible for publicising the Company’s products via promotions and public campaigns and developing the Company’s image, private label brands and other trademarks.

Risk Management Committee

The Risk Management Committee consists of five members and is chaired by Michael Remsen. Its other members are Richard Gibson, Andre Rumantir, Maju Tarigan and Sunny Setiawan. The Risk Management Committee is a committee formed by the Board to assist them in developing, implementing and managing Company-wide risk management policies. The Risk Management Committee primary responsibilities include:

Š developing and managing security, insurance, disaster recovery and loss prevention programmes;

Š ensuring Company-wide compliance with standard operating procedures and controls; and

Š investigating reports received through the whistle-blower system (for further information, see the section “Whistle Blower System and Anti-fraud System” below).

CORPORATE SECRETARY

The Company has a Corporate Secretary who liaises with capital market authorities, investors, and the public and ensures that the Company adheres to principles of good corporate governance. The Corporate Secretary is responsible for, among other things:

Š staying abreast of capital market developments, in particular changes to statutory laws and regulations;

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Š advising the Board of Directors on compliance with the provision of Law No. 8/1995 concerning the Capital Market and its implementation regulations;

Š acting as the intermediary between the Company, OJK, and the public to disclose information relevant to the Company’s status as a public company (for instance information on the Company’s performance and operating activities);

Š facilitating and documenting minutes from all shareholder and board meetings; and

Š submitting mandatory reports as a public company to relevant authorities, such as quarterly reports, management reports and annual reports.

INTERNAL AUDIT

The Company has an Internal Audit Unit which reports directly to the President Director. The head of the Internal Audit Unit, Freddy Sanusi, supervises a team of seven corporate auditors. The Internal Audit Unit was created to assist the Company with risk management and optimise the Company’s practice of good corporate governance. Its key responsibilities include:

Š preparing and implementing the annual internal audit plan;

Š evaluating the implementation of the internal control and risk management system, recommending areas for improvement and monitoring the effectiveness of relevant follow-up action;

Š evaluating the efficiency and effectiveness of the Company’s performance in areas including finance, accounting, operation, human resources, marketing and information technology;

Š designing programmes for quality assessment activities;

Š conducting special audits as required; and

Š preparing reports on audit findings for the President Director, the Board of Commissioners and the Audit Committee.

WHISTLE BLOWER SYSTEM

The Company has partnered with a third party to administer and run a whistle blower hotline, called Suara Matahari. Suara Matahari is an independent hotline that enables Management, employees and suppliers to anonymously and confidentially report any illegal or inappropriate acts. Reports to Suara Matahari can be lodged via a toll-free number, fax, website, email or post. The whistle blower hotline is advertised to Management, employees and suppliers and is staffed by experienced operators who take reports and forensic investigation experts who investigate reports received and report issues to Management.

CODE OF CONDUCT AND BUSINESS ETHICS (THE “CODE OF CONDUCT”)

The Company seeks to comply with principles of good corporate governance (including transparency, accountability, responsibility, independence, fairness and equality) via its Code of Conduct. The Code of Conduct outlines the Company’s core values and seeks to guide the Board of Management, Board of Directors, Board of Commissioners and all other employees in the execution of their daily responsibilities including their interactions with other employees, shareholders, suppliers, and regulatory officials. The Code of Conduct encourages staff to:

Š improve accountability, transparency, and compliance with existing laws and regulations;

Š implement tasks with the highest degree of professionalism and integrity;

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Š avoid inappropriate corporate gifts, bribery and kick backs;

Š avoid activities which may give rise to a conflict of interest with work; and

Š protect the Company’s confidential information, both during and after employment.

COMMISSIONERS, DIRECTORS AND MANAGEMENT’S INTERESTS AND REMUNERATION

As at the Latest Practicable Date and immediately following completion of the Offering, each of Travis Saucer, Henry Liando, Mang Wing Ming Rene, Bunjamin J Mailool, Michael Remsen, Richard Gibson, Christian Kurna, Martin Laihad, and Sunny Setiawan are ultimate beneficial owners of Shares not exceeding 1% of the Company’s issued share capital.

In 2010, 2011 and 2012, the aggregate compensation (including bonuses) for: (i) the Board of Commissioners was Rp2.2 billion, Rp2.5 billion and Rp3.4 billion respectively; (ii) the Board of Directors was Rp12.8 billion, Rp3.4 billion and Rp10.1 billion respectively; and (iii) the Board of Management was Rp33.7 billion, Rp36.6 billion and Rp32.4 billion respectively.

COMMISSIONERS, DIRECTORS AND MANAGEMENT’S SERVICE CONTRACTS

The Chief Executive Officer, Michael Remsen, has renewed his contract with the Company until the end of 2014. In the event that the Company, at its own discretion, terminates Michael Remsen’s contract early, the Company will be required to pay him the remaining value of his contract.

The Chief Financial Officer, Richard Gibson, has renewed his contract until the end of 2015. In the event that the Company, at its own discretion, terminated Richard Gibson’s contract early, the Company will be required to pay him the remaining value of his contract.

The Logistics Director, Keith Jones, has renewed his contract until the end of May 2014. In the event that there is a sale of the Company and the Company terminates Keith Jones’ contract early, the Company will be required to pay him the remaining value of his contract.

Other than as disclosed above, none of the members of the Board of Commissioners, Board of Directors or Board of Management has entered into a service contract with the Company which provides for benefits upon termination of employment.

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The information presented in this section has been derived from publicly available documents, government publications as well as industry sources. Neither the Company nor the Joint Global Coordinators and Joint Bookrunners or their respective affiliates, directors, officers, representatives or advisors make any representation as to the accuracy of this information. These sources are based on economic and other assumptions that may prove to be incorrect and the information has not been independently verified by the Company, the Joint Global Coordinators and the Joint Bookrunners, any of its or their respective affiliates, directors, officers or representatives, nor any of its or their respective advisors and none of the parties can guarantee its validity. You should recognise that certain industry data contained in this section is estimated in the absence of official company confirmation or reliable country source information, and you should not place undue reliance on such data. Some amounts in this section are rounded.

This section includes forecasts, estimates and other forward-looking statements. These forecasts, estimates and other forward-looking statements are necessarily based on various assumptions and estimates that are inherently subject to various risks and uncertainties relating to possible invalidity of the underlying assumptions and estimates and possible changes or development of social, economic, business, industry, market, legal, government, and regulatory circumstances and conditions and actions taken or omitted to be taken by others. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic and competitive market conditions and future government and business decisions, all of which are difficult or impossible to predict accurately. Actual results and future events could differ materially from such projections. You should not place undue reliance on such statements, or on the ability of publicly available documents, government publications, industry sources or any other third party to accurately predict future industry trends or performance.

CONVENTIONS AND DEFINED TERMS

Unless otherwise mentioned, the macroeconomic data including GDP, inflation and value of exports and demographic data presented in the “Indonesia’s Consumption Growth” section have been sourced from Euromonitor. Where relevant, the data is presented in constant terms1, with a reference price as of 20112 for each year of the historic and forecast period. All data are converted from local currency using 2011 exchange rates for each year of the historic and forecast period, and as such excludes the impact of exchange rate fluctuations.

Similarly, unless otherwise mentioned, the retail and market share data including retailing, store and non-store- based, grocery and non-grocery, and department store data presented in the “Overview of the Retail Industry in Indonesia” and “Overview of the Indonesian Department Store Segment” sections, have been sourced from Euromonitor, and are presented in constant terms, with a reference price as of 20123. All value data is converted from local currency using 2012 exchange rates for each year of the historic and forecast period, and as such excludes the impact of exchange rate fluctuations.

In this section, Indonesia is compared to other Southeast Asian countries due to similar dynamics, including demographic growth, increasing wealth and discretionary income, and retail sector trends. In addition to Southeast Asian countries, China is also included given its comparable strong economic growth profile, whereas the United States of America (“USA”) is included for reference to the largest and most mature department store market globally. All these countries combined, for the purpose of this section, will be referred to as the “Selected Countries”.

1 Euromonitor defines constant terms as values with inflation excluded

2 Based on Euromonitor estimates of exchange rates in 2011

3 Based on Euromonitor estimates of exchange rates in 2012

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The exchange rates to USD are shown below for historical and forecast periods: Foreign exchange rates used for Foreign exchange rates used for macroeconomic data retailing data Country Unit (Reference Year 2011) (Reference Year 2012) Indonesia Rp/USD 8,777 9,390 Singapore SGD/USD 1.26 1.27 Malaysia MYR/USD 3.06 3.15 Thailand THB/USD 30.49 31.18 Philippines PHP/USD 43.32 43.75 China RMB/USD 6.46 6.31 Vietnam VND/USD 20,499 20,927

Source: Euromonitor

Selected Euromonitor definitions:

Retailing refers to sales of new and used goods to the general public for personal or household consumption. This excludes specialist retailers of motor vehicles, motorcycles, vehicle parts, fuel, and also excludes foodservice, rental and hire, and wholesale industries. Retailing is the aggregation of store-based retailing and Non-store retailing.

Retail value sales measures the value of sales generated from retailing activities. Retail sales value in this section excludes VAT / sales tax.

Store-based retailing refers to the aggregation of grocery retailers and non-grocery retailers. This includes sales of new and used goods to the general public for personal or household consumption from retail outlets or market stalls. and excludes specialist retailers of motor vehicles, motorcycles, vehicle parts, fuel, foodservice, rental and hire and wholesale industries.

Non-store based retailing refers to retail sale of new and used goods for personal or household consumption from locations other than retail outlets or market stalls.

Grocery retailers refers to retailers selling predominantly food / beverages / tobacco and other everyday groceries. This is the aggregation of hypermarkets, supermarkets, discounters, convenience stores, independent small grocers, chained forecourt retailers, independent forecourt retailers, food / drink / tobacco specialists and other grocery retailers.

Modern grocery retailers refers to the aggregation of grocery channels that have developed alongside the growth of chained retail. For Euromonitor, modern grocery retailing is the aggregation of five channels, which are hypermarkets, supermarkets, discounters, forecourt retailers and convenience stores.

Traditional grocery retailers refers to the aggregation of grocery channels that are non-chained and are owned by families and / or run on an individual basis. For Euromonitor, traditional grocery retailing is the aggregation of three channels, which are independent small grocers, food / drink / tobacco specialists and other grocery retailers.

Non-grocery retailers refers to retail outlets selling predominantly non-grocery consumer goods. This excludes retailers selling predominantly food, beverages and tobacco, as well as fuel, automotives and parts. Non-grocery retailers is the aggregation of mixed retailers, health and beauty retailers, clothing and footwear retailers, home furniture and household goods retailers, durable goods retailers, leisure and personal goods retailers, other non- grocery retailers.

Mixed retailers refers to the aggregation of department stores, variety stores, mass merchandisers and warehouse clubs.

Department stores refers to outlets selling mainly non-grocery merchandise and at least five lines in different departments, usually with a sales area of over 2,500 square metres and arranged over several floors.

Apparel refers the aggregation of retail sales of clothing and footwear through both store-based retailers and non- store retailers. Clothing refers to the aggregation of articles of dress or garments for children, men’s clothing and

Page 158 ------18. INDUSTRY ------women’s clothing (both outerwear, underwear, swimwear, nightwear, and hosiery), and must be sold new to the customer. Footwear refers to the aggregation of children’s footwear, men’s footwear, and women’s footwear, which includes both indoor and outdoor shoes, and must be sold new to the customer.

INDUSTRY OVERVIEW

Indonesia has the fourth largest population in the world, and according to Euromonitor, is forecast to be the third fastest growing economy, in terms of GDP growth, among the 16 largest global economies between 2011 and 2016. Robust economic performance has resulted in increasing average GDP per capita with a large and growing middle-income segment. According to 2010 data from the Central Bureau of Statistics on Indonesian population segmentation by consumer expenditure, there are 124.5 million consumers, or 52.4% of the total population of Indonesia, who had an expenditure of between Rp0.7 million to Rp4.5 million per capita per month. This consumer segment has been identified by the Management as the Indonesian middle-income population.

The mixed retailer segment in Indonesia, which consists almost entirely of department store retailers, is expected to be one of the fastest growing major retailing formats in the non-grocery segment between 2011 and 2016. Euromonitor forecasts the real value of retail sales by department stores to grow at a CAGR of 7.6% (nominal CAGR of 12.8%) between 2011 and 2016, driven by economic growth, favourable demographic prospects, continuing urbanisation with accompanying rises in disposable income, changing consumption behaviour such as increasing impulse purchases and the relative under-penetration of the department store format vis-à-vis other Asian countries. According to Euromonitor, Indonesia had on average only 2.7 department stores per million people for the year 2011 as compared to the average of 4.8 department stores per million people for the Selected Countries (excluding USA and Vietnam).

MDS is the leading department store retailer in Indonesia with a market share of 31.6% of the department store segment in 2011 based on retail value sales, according to Euromonitor. Other major players include Ramayana, PT Mitra Adiperkasa (“MAPI”), PT Akur Pratama (“Akur”), and PT Metropolitan RetailMart (“Metropolitan”) with market shares of 22.5%, 7.7%, 4.4% and 3.3% respectively of the department store segment in 2011. The top five players have grown faster than the overall department store segment, growing their collective market share from 60.0% of the department store segment based on retail value sales in 2006 to 69.5% in 2011.

According to McKinsey Global Institute, the fastest-growing cities in Indonesia will be the large middleweight4 and mid-size middleweight5 cities which it forecasts will grow at real GDP compound annual growth rates of 9.1% and 6.9% respectively from 2010 to 2030, subject to sufficient investment in urban infrastructure such as housing, water, energy and transportation, as well as continued improvement in productivity in Indonesia. Management believe that this offers significant growth opportunities for MDS, with the establishment of modern retail infrastructure such as shopping malls in these cities. Private label goods are gaining popularity with Indonesian customers, as they address their growing aspirational purchasing behaviour towards branded products and are increasingly more affordable as their wealth and discretionary spending increase. Given the positive outlook for the Indonesian retail industry, especially in the department store segment, there is increasing competition in the retail industry with the entry of foreign players such as Parkson Retail Asia and Lotte Department Store, who target affluent customers in major cities.

INDONESIA’S CONSUMPTION GROWTH

Strong economic growth in Indonesian economy

According to Euromonitor, Indonesia has the largest population in Southeast Asia, and the fourth-largest population in the world, only behind China, India and the USA with approximately 235 million people6 as of 2011. Its large population relative to other countries in Southeast Asia ensures a large consumer base, with a middle-income population of approximately 124.5 million as of 2010, according to Management’s classification of the Indonesian middle-income population and based on data from the Central Bureau of Statistics.

4 Defined by McKinsey Global Institute as cities with a population of between 5 to 10 million 5 Defined by McKinsey Global Institute as cities with a population of between 2 to 5 million 6 Based on Euromonitor data as of 1st January 2011

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The chart below sets forth the total population and median age of Selected Countries and Indonesia’s population relative to the Selected Countries.

Chart 1: Total population (millions) and median age (years) of Selected Countries and Indonesia’s total population relative to the Selected Countries (x) (2011)

Relative size of Indonesia population (x) 2.5x 2.6x 3.4x 8.2x 45.7x

1,341 Median Age (Years)

312

235 Population (mn)

96 89 70 5 29 39 37 38 29 23 29 35 27

China USA Indonesia Philippines Vietnam Thailand Malaysia Singapore

Source: Euromonitor | Note: Chart shown is not to scale

The performance of the Indonesian economy has been strong in recent years, especially in light of the challenges faced by the global economy since 2007. Over the last decade, Indonesia has had the lowest volatility in economic growth when compared to the advanced economies in the Organisation for Economic Co-operation and Development (“OECD”), the BRICs (Brazil, Russia, India, and China) and South Africa, according to McKinsey Global Institute7. This has been due to Indonesia’s large domestic market and relatively modest dependence on exports, as well as major macroeconomic policy initiatives over the past decade including the adoption of inflation targeting and setting a more flexible exchange rate policy.

According to Euromonitor, Indonesia’s exports as a percentage of GDP was 26.3% in 2011, which is relatively low when compared to the Selected Countries.

The chart below sets forth the value of exports for Selected Countries as a percentage of their GDP in 2011.

Chart 2: Value of exports for Selected Countries as a percentage of GDP (2011)

Exports as % of GDP

209.0%

91.6%

76.9% 71.6%

31.0% 26.3% 23.1% 13.9%

Singapore Malaysia Thailand Vietnam Philippines Indonesia China USA

Source: Euromonitor | Note: Chart shown is not to scale

7 McKinsey Global Institute, “The archipelago economy: Unleashing Indonesia’s potential”, September 2012

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In addition, changes in the average consumer price index for Indonesia have moderated from 13.3% in 2006 to 5.4% in 2011, according to Euromonitor. Indonesia has been upgraded to investment grade by credit agencies including Moody’s and Fitch since 2011. According to the OECD international direct investment database8, foreign direct investment inflows have increased to USD19.2 billion in 2011 from USD13.8 billion in 2010. Bank Indonesia has gradually reduced the Bank Indonesia rate by 700 basis points from 12.8% in January 2006 to 5.8% in February 20129.

The charts below show the changes in the average Indonesian consumer price index between 2006 and 2011, with forecast changes in the average Indonesian consumer price index between 2012 and 2016, and the Bank Indonesia rate from January 2006 to February 2013.

Chart 3: Percentage changes in Indonesian Consumer Price Index (average) (%) (2006 – 2016F) 13.3%

10.2%

5.1% 5.4% 5.2% 5.2% 5.1% 5.2% 6.4% 4.4%

4.4%

2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F Source: Euromonitor

Chart 4: Bank Indonesia rate (%) (January 2006 – February 2013) 14%

13%

12%

11%

10%

5% 01-Jan-06 01-Jan-07 01-Jan-08 01-Jan-09 01-Jan-10 01-Jan-11 01-Jan-12 Source: Bank Indonesia

These factors have resulted in Indonesia’s real GDP growing at a CAGR of 5.9% between 2006 and 2011 and Euromonitor forecasts real GDP to continue to grow strongly at a CAGR of 6.4% between 2011 and 2016. Management expects this positive outlook for the Indonesian economy to benefit the retail industry, encouraging further spending and investment in the country.

8 Based on FDI In Figures for October 2012 from OECD website at www.oecd.org

9 Bank Indonesia website at http://www.bi.go.id/web/en/Moneter/BI+Rate/Data+BI+Rate/

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The charts below set forth Indonesia’s historical and forecast real GDP, GDP per capita and real GDP CAGR between 2006 and 2016 respectively; Selected Countries real GDP and forecast real GDP CAGR between 2011 and 2016 respectively; forecast real GDP CAGR of the 16 largest global economies between 2011 and 2016 respectively.

Chart 5: Indonesia’s historical and forecasted real GDP (USD billion) and GDP per capita (USD) at constant 2011 prices (2006 - 2016F)

USD bn USD 1,400 4,681 5,000 4,442 ’11-’16F GDP CAGR:4,214 6.4% 1,200 3,997 3,789 3,601 4,000 ’06-’11 GDP CAGR: 5.9%3,419 1,000 3,147 3,255 3,004 2,859 3,000 800

600 1,085 1,153 2,000 958 1,020 846 899 400 749 795 675 715 635 1,000 200

- - 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F

GDP (USD bn) GDP per capita (USD) Source: Euromonitor

Chart 6: GDP (USD billion) of Selected Countries (2011) and their forecast real GDP CAGR (%) (2011-2016)

15,076 7.7%

7,212 6.4% 6.5%

5.3% 5.4% 5.0% 846

USD bn 3.5%

2.5% 346 288 260 225 124

USA China Indonesia Thailand Malaysia Singapore Philippines Vietnam

Source: Euromonitor | Note: Chart shown is not to scale

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Chart 7: Forecast real GDP growth CAGR (%) (2011 - 2016F) of the world’s 16 largest economies

GDP CAGR ’11 - ’16F

China 7.7% India 7.1% Indonesia 6.4% Russia 4.1% Brazil 3.7% Mexico 3.5% South Korea 3.4% Australia 3.0% USA 2.5% Canada 2.3% United Kingdom 1.6% Japan 1.3% Germany 1.2% France 1.1% Spain 0.7% Italy (0.3%)

Source: Euromonitor

Large middle-income segment

Indonesia has witnessed the emergence of a large middle-income segment. According to 2010 data from the Central Bureau of Statistics on Indonesian population segmentation by consumer expenditure per capita per month, the Indonesian middle-income population10 as defined by Management, comprised 124.5 million people in 2010, or 52.4% of Indonesia’s total population.

Chart 8: Indonesian population by consumer expenditure per capita per month (2010)

millions Middle-Income 120 Population: 124.5 million* 106.5 100

60 45.3 40 39.0

18.1 20 14.6 7.5 6.9 0 < Rp0.7mnRp0.7mn - Rp1.0mn - Rp1.5mn - Rp2.0mn - Rp3.0mn - > Rp4.5mn Rp1.0mn Rp1.5mn Rp2mn Rp3.0mn Rp4.5mn

Source: Central Bureau of Statistics and Management estimates * Based on Management estimates and classification of the middle-income segment

10 Management defines middle-income as people with an expenditure between Rp0.7 million – 4.5 million per capita, per month

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Rapid urbanisation

As a result of economic growth, Indonesia has witnessed a significant increase in urban population, which has grown from 109 million in 2006 to 129 million people in 2011, according to Euromonitor. This trend of increasing urbanisation is expected to continue, and Euromonitor forecasts that by 2016, 146 million people will live in urban areas, as compared to 100 million people in rural areas. This shift to urban areas would imply that the percentage of the population living in urban areas would increase significantly from 49.3% in 2006 to 59.4% in 2016, according to Euromonitor forecasts. The chart below sets forth the breakdown of Indonesia’s population between urban and rural and the percentage of rural population between 2006 and 2016.

Chart 9: Historical and forecast total Indonesian urban and rural population (millions) with respective percentage split (%), and rural population as a percentage of total population (%) (2006 – 2016F) Population (mn) Rural Population (% of total) 300 55%

240 242 244 246 250 230 233 235 237 222 225 227 50% 41.5% 40.6% 200 42.4% 44.3% 43.3% 45.3% 45% 47.4% 46.3% 150 48.4% 50.7% 49.6% 59.4% 40% 58.5% 100 56.7% 57.6% 55.7% 53.7% 54.7% 52.6% 35% 50 50.4% 51.6% 49.3%

0 30% 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F

% of rural population Urban population Rural population

Source: Euromonitor

As the Indonesian population continues to shift from rural to urban areas where there is a greater possibility of earning a higher income, Management expects household disposable income to continue to grow. Management expects a larger urban population to result in increased consumer expenditure generally and to have a positive impact on the retail industry. In addition, Management believe that urban consumers with higher disposable incomes are more aware of international lifestyle and fashion trends, which may spur demand for products such as the latest clothing and footwear, consumer electronics and personal grooming products.

Mid-sized cities are growing at a faster pace than Jakarta

As at the Latest Practicable Date, MDS operated 116 stores in over 50 cities across Indonesia. While Java and Bali are the largest economic regions in Indonesia, contributing 59.4% of total GDP at current prices in 2010, McKinsey Global Institute (“MGI”)11 estimates that the fastest-growing urban centres will be large middleweight and mid-sized middleweight cities, which it forecasts will grow at real GDP compound annual growth rates of 9.1% and 6.9% from 2010 to 2030 respectively. These cities include Medan, Bandung, Surabaya as well as parts of Jabodetabek. However, MGI notes that the growth in these cities is only achievable with sufficient investment in infrastructure, such as housing, water, commercial buildings, and transportation to ensure that growth and expansion keep up with urban demand.

MGI also states that for Indonesia to achieve its growth potential, the country would need to increase productivity, which may include liberalising industry regulations, reducing trade protectionism, improving

11 McKinsey Global Institute “The archipelago economy: Unleashing Indonesia’s potential”, September 2012

Page 164 ------18. INDUSTRY ------transportation infrastructure, as well as improving telecommunications and broadband internet. Indonesia will also need to efficiently manage increasing demand from consumers, specifically on food, water, energy and financial capital without straining the economy. Without effectively managing these issues Indonesia could run the risk of constraining GDP growth.

According to MGI’s estimates, around 90% of urban areas whose economies are growing at a rate of over 7% per annum are expected to be outside the island of Java. This growth in mid-sized middleweight cities presents an attractive opportunity for retailers targeting middle-income customers, given the increasing discretionary income and urbanisation in these cities. The chart below set forth Indonesia’s forecast real GDP CAGR between 2010 and 2030 by city size.

Chart 10: Indonesia forecast real GDP CAGR (2010 - 2030F) by city size

GDP CAGR 2010 - 2030F

Jakarta 5.1%

Large middleweight cities 9.1% (5 - 10mn)

Mid sized middleweight cities 6.9% (2 - 5mn)

Small-sized middleweight 6.3% cities (150k - 2mn)

Other cities (< 150k) 1.7%

Rural 2.0%

Indonesia 5.3%

Source: 2010 Population Census and Socio-Economy Survey; Indonesia’s Central Bureau of Statistics; McKinsey Global Institute

Young and growing workforce and population

Indonesia’s large population is relatively young and growing. Management believe that a young and working population will drive Indonesia’s economic growth, leading to increased consumer spending. Management expect the young, increasingly fashion-conscious population to stimulate instances of impulse purchases, which are expected to favourably impact the retail industry. According to Euromonitor, in 2011, 26.3% of the Indonesian population was aged below 15 years, and 60.8% was aged 34 years and below, and the median age was 29 years old. Management believe this demographic provides a large and attractive customer base for MDS. MDS derived approximately 40% of its Gross Sales from younger customer merchandise in 2011.

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The charts below set forth the median age, total number of 15 – 34 year olds and as a % of total population for the Selected Countries and Indonesian population split by age group.

Chart 11: Median age of total population, number of 15 – 34 years olds and % of 15 – 34 year olds of total population for the Selected Countries (2011)

# of 15-34 365.6 1.5 85.6 21.2 81.0 33.4 10.0 34.2 year olds (mn)

45 40%

40 35%

35 30% 30 25% 25 20% 20 39 38 37 35 15% 15 29 29 27 23 10 10% 5 5% 0 0% China Singapore USA Thailand Indonesia Vietnam Malaysia Philippines

% of population aged 15-34 as a % of total population Median Age (Total Population)

Source: Euromonitor

Chart 12: Population split for Indonesia by age groups (2011 and 2016F)

Population (mn)

62 60

2020 20 20 21 20 20 20 19 18 17 18 16 17 14 14 14 12 12 9 7 9

Aged 0 Aged Aged Aged Aged Aged Aged Aged Aged Aged Aged Aged - 14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

2011 2016F

Source: Euromonitor

Growing consumer expenditure and changing consumption patterns

Management believe that Indonesia’s strong economic outlook, rapid urbanisation, growing middle-income population and favourable demographics will result in increasing consumer expenditure which should drive higher growth for the retail industry. Euromonitor estimates that consumer expenditure and consumer expenditure per capita increased from Rp2,845 trillion and Rp12,816 respectively in 2006 to Rp4,068 trillion and Rp17,312 respectively in 2011 representing a real CAGR of 7.4% and 6.2% (nominal CAGR of 14.2% and 12.9%) respectively between 2006 and 2011. Euromonitor forecasts that consumer expenditure and consumer expenditure per capita will increase from Rp4,068 trillion and Rp17,312 respectively in 2011 to Rp5,267 trillion and Rp21,383 respectively in 2016 representing a forecasted real CAGR of 5.3% and 4.3% (nominal CAGR of 10.6% and 9.6%) respectively between 2011 and 2016.

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As the Indonesian GDP per capita increases and disposable income rises, Euromonitor expects Indonesians to make more discretionary non-food purchases. The chart below sets forth historical and forecasted Indonesian consumer expenditure and consumer expenditure per capita between 2006 and 2016, and split of household expenditure between food and non-food items between 2002 and 2011.

Chart 13: Consumer expenditure (Rp trillions), consumer expenditure per capita (Rp millions) and real growth rates (2006 – 2016F)

Rp tr Rp mn 6,000 25,000 CAGR ’11 - ’16F: 5.3% 21,383 20,395 19,532 5,000 18,757 18,029 20,000 17,312 CAGR ’06 - ’11: 7.4%16,572 15,911 4,000 15,358 14,272 12,816 15,000 3,000 4,980 5,267 4,497 4,727 10,000 2,000 4,068 4,280 3,659 3,853 3,206 3,492 2,845 5,000 1,000

- - 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F

Consumer expenditure Consumer expenditure per capita

Source: Euromonitor

Chart 14: Historical split of household expenditure between food and non-food (2002 – 2011)

41.5% 43.1% 45.4% 48.6% 47.0% 50.8% 49.8% 49.4% 48.6% 50.6%

58.5% 56.9% 54.6% 51.4% 53.0% 49.2% 50.2% 50.6% 51.4% 49.5%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Household expenditure for food Household expenditure for non food

Source: Statistics Indonesia

OVERVIEW OF THE RETAIL INDUSTRY IN INDONESIA

The Indonesian retail market can be segmented into store-based and non-store based retailing. Store-based retailing comprises grocery and non-grocery retail formats while non-store retailing comprises direct sales, home shopping, internet retailing and vending. Grocery retailing comprises modern grocery retailers, which includes hypermarkets, supermarkets, discounters, and convenience stores, while traditional retailers comprises food/ drink/tobacco specialists, independent small grocers and other grocery retailers. Non-grocery retailing includes mixed retailers, health and beauty specialist retailers, apparel specialist retailers, home and garden specialist retailers, electronics and appliance specialist retailers, leisure and personal goods retailers. According to Euromonitor, mixed retailers mainly comprise department stores, with department stores making up 98.7% of total mixed retailer value sales in 2011.

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Chart 15: Overview of department stores in the Indonesian retail market (Retail value sales 2011)

Indonesian Retail Market Rp1,188.0 trillion

1.5% 98.5% Non-Store Based Retailing Store Based Retailing Rp17.4 trillion Rp1,170.6 trillion

71.2% 28.8% Grocery Retailing Non-Grocery Retailing Rp833.6 trillion Rp337.0 trillion

90.8% 9.2% Non-Grocery Retailing ex. Mixed Retailers Mixed Retailers Rp31.1 trillion Rp305.9 trillion

1.3% 98.7% Other Mixed Retailers Department Stores Rp0.4 trillion Rp30.7 trillion

Source: Euromonitor | Numbers in the boxes shown are retail value sales in 2011

Indonesia is relatively underpenetrated in terms of total retail sales per capita compared to other countries in Southeast Asia. Based on Euromonitor estimates, retail sales in 2011 in Indonesia amounted to only USD538 per capita, in contrast to other Southeast Asian countries such as Singapore, Malaysia, Thailand, Vietnam and the Philippines, all of which had higher retail sales per capita. In terms of retail space per capita, Indonesia is also relatively underpenetrated with only 0.3 square meters per capita compared to other Southeast Asian countries averaging 0.45 square meters per capita as at 2011, according to Euromonitor.

The charts below set forth a comparison of total retail sales per capita in USD and total retail space per capita in million square feet for the Selected Countries for 2011.

Chart 16: Total retail sales per capita for Selected Countries (USD) (2011)

USD per capita

USA 8,763

Singapore 4,560

Malaysia 1,216

Thailand 1,107

China 1,072

Vietnam 691

Philippines 635

Indonesia 538

Source: Euromonitor

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Chart 17: Total retail space per capita for Selected Countries (square meters per capita) (2011)

Millions of sq m per capita

USA 2.9

Malaysia 0.5

Singapore 0.5

Thailand 0.5

China 0.5

Vietnam 0.4

Indonesia 0.3

Philippines 0.3

Source: Euromonitor

According to Euromonitor, store-based retailing grew from Rp1,055 trillion in 2006 to Rp1,171 trillion in 2011, representing a real CAGR of 2.1% (nominal CAGR of 8.5%). Euromonitor forecasts that store-based retailing will increase from Rp1,171 trillion in 2011 to Rp1,484 trillion in 2016, representing a real CAGR of 4.9% (nominal CAGR of 10.0%), while maintaining approximately the same proportion of store-based sales to total retail sales (98.5% in 2011). The chart below sets forth the historical and forecast sales value of store-based and non-store based retailing, and non-store based retail sales as a % of total sales.

Chart 18: Total retailing in Indonesia, store-based retail sales vs non-store retail sales (Rp trillions) and non-store-based retail sales as a percentage of total sales (%) (2006 – 2016F)

Rp tr Store-based sales as a % of total retail sales 1,800 100%

1,600 1,509 1,444 1,384 25 1,400 1,320 23 99% 1,260 22 1,188 20 1,132 19 1,200 1,092 1,087 17 1,067 1,058 16 12 13 15 98% 1,000 14

800 1,421 1,484 97% 1,300 1,362 600 1,171 1,241 1,055 1,079 1,044 1,073 1,116 400 96% 200

- 95% 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F

Store based retailing as % of total retailing Store based retailing Non store based retailing

Source: Euromonitor

The Indonesian retail market is highly fragmented with sales of the top 10 retailers comprising less than 10% of store-based retail sales. According to Euromonitor, MDS is the only non-grocery retailer among the top five store-based retailers in the country based on retail value sales in 2011.

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The chart below sets forth market shares of the top five store-based retailers.

Chart 19: Retailing company market share as a percentage of total store-based retail value sales (2011)

Market shares % of Retail Value 2011 1.8% 1.6% 1.6% 1.4% 1.2% 1.2% 1.1% 1.0% 0.8% 0.8% 0.8% 0.6% 0.4% 0.2% 0.0% Sumber Alfaria Indomarco Carrefour Matahari Putra Matahari Trijaya Tbk PT Prismatama PT Indonesia PT Prima Tbk PT Department Store Tbk PT

Source: Euromonitor

According to Euromonitor, non-grocery retailing comprised 28.8% of total sales in store-based retailing in 2011. Between 2006 and 2011, grocery retail sales has grown at a higher rate than non-grocery retail sales, registering a real CAGR of 2.7% (nominal CAGR of 9.1%) compared to a real CAGR of 0.8% (nominal CAGR of 7.2%) for non-grocery retail sales. However going forward, Euromonitor forecasts that non-grocery retailing will grow faster in the period between 2011 and 2016, growing at a real CAGR of 5.4% (nominal CAGR of 10.5%) as compared to grocery retailing at real CAGR of 4.7% (nominal CAGR of 9.8%) over the same period. The expected continued growth in disposable income is expected to improve consumer confidence and many Indonesians are expected to look beyond daily necessities such as groceries in their purchasing decisions and may increase their spending on other products such as clothing and footwear. The chart below sets forth the historical and forecast store-based retail sales by grocery and non-grocery formats and the proportion of sales of non-grocery retailers to total store-based retail sales.

Chart 20: Sales in store-based retailing by grocery vs. non-grocery retailers (Rp trillions) and real growth rates (2006-2016F)

Rp tr % 2,000 31.0% 1,800 30.5% Total store-based retailing 1,600 1,484 CAGR ’11 - ’16F: 4.9%1,421 Total store-based retailing 1,362 30.0% 1,400 1,300 CAGR ’06 - ’11: 2.1% 1,241 1,171 438 1,200 1,116 411 29.5% 1,055 1,079 1,044 1,073 388 352 368 1,000 326 337 29.0% 324 328 319 320 800 28.5% 600 974 1,010 1,047 28.0% 834 889 932 400 731 751 725 753 791 200 27.5% - 27.0% 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F

Proportion of Non-Grocery Retailers Grocery Retailers Non-Grocery Retailers

Source: Euromonitor

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Modernisation in Indonesian Retail and Grocery Retail

Traditional grocery retailers, which include food / drink / tobacco specialists, independent small grocers and other grocery retailers accounted for the largest share within grocery retailers in terms of sales value in Indonesia in 2011. Sales of traditional stores accounted for approximately 86.5% of grocery sales in 2011 according to Euromonitor. Modern grocery retailers, including convenience stores, hypermarkets, and supermarkets, have increased their share within grocery retailers through continued expansion and shifting consumer preference towards modern grocery retail given their wider product offering at competitive prices in a customer-friendly environment. The chart below sets forth the historical and forecast split of 2011 and 2016 grocery retail sales by category.

Chart 21: Historical and forecasted split of grocery retail sales by category (2011 and 2016F) 2011: Modern grocery retail at 13.5% 2016F: Modern grocery retail at 16.4%

Convenience Stores Hypermarkets Convenience Stores Hypermarkets 4.6% 3.4% 6.7% 3.8% Supermarkets Supermarkets 5.5% 5.9%

Food/Drink/Tobacco Specialists Food/Drink/Tobacco 1.1% Specialists 1.2%

Independent Small Other Grocery Other Grocery Independent Small Grocers Retailers Retailers Grocers 29.7% 55.7% 54.0% 28.4%

Source: Euromonitor

Modern grocery retail formats are relatively underpenetrated in Indonesia, as Euromonitor estimates that only 13.5% of modern grocery retail sales make up total grocery retail sales in 2011, compared to an average of countries such as USA, Singapore, China, Malaysia, Thailand, Philippines and Vietnam of 48.0%. The chart below sets forth the percentage of modern grocery retail as a % of total grocery retail for 2011 for these countries.

Chart 22: Percentage of modern grocery retail as a % of total grocery retail (%) (2011)

Modern grocery retail as % of total grocery retail

USA 83.8%

Singapore 70.0%

China 61.7%

Malaysia 51.3%

Thailand 40.9%

Philippines 24.1%

Indonesia 13.5%

Vietnam 4.3%

Source: Euromonitor

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Due to their deep penetration in the country, traditional retailers are an important retail channel in Indonesia. Modern grocery retailers are however increasingly capturing a growing share of retail spending, driven by economic growth, rapid urbanisation and an increasing proportion of young population who are brand conscious. While department stores are not part of grocery retail, Management expects the department store segment and hence MDS in the non-grocery segment to benefit from this increasing modernisation.

Non-Grocery Retail

In terms of non-grocery retail, specialist retailers, including apparel specialists, electronics and appliance specialists, health and beauty specialists, leisure and personal goods specialists, and home and garden specialist retailers contributed 71.4% of total non-grocery sales by value in 2011, according to Euromonitor. Mixed retailers contributed 9% of total non-grocery sales by value in 2011 according to Euromonitor, and Management believe that mixed retailers will continue to be an important channel for non-grocery retailing. Mixed retailers are dominated by department stores, which constituted 98.7% of sales value of mixed retailers in 2011, according to Euromonitor. The chart below sets forth the historical and forecast split of 2011 and 2016 non-grocery retail sales by retail channel.

Chart 23: Split of 2011 and 2016F non-grocery retail sales by category 2011: Mixed retailers at 9% 2016F: Mixed retailers at 10% Home and Garden Home and Garden Specialist Retailers Specialist Retailers Other Non-Grocery Other Non-Grocery 7% 7% Retailers Retailers 15% 19%

Mixed Retailers Mixed Retailers Apparel Specialist 9% 10% Retailers Apparel Specialist 26% Retailers Electronics and Electronics and 30% Appliance Appliance Specialist Specialist Retailers Retailers 19% 12% Health and Beauty Leisure and Specialist Retailers Leisure and 12% Personal Goods Health and Beauty Personal Goods Specialist Retailers Specialist Retailers Specialist Retailers 11% 12% 11%

Source: Euromonitor

OVERVIEW OF THE INDONESIAN DEPARTMENT STORE SEGMENT

According to Euromonitor, mixed retailers which almost entirely consists of department store retailers, are forecast to be one of the fastest growing12 major retail formats in the non-grocery retail segment in Indonesia with a retail value sales real CAGR of 7.5% (nominal CAGR of 12.8%) between 2011 and 2016. Euromonitor expects department stores to grow at a rapid pace due to the growth in Indonesia’s middle-income segment and increasing discretionary spend which should translate into higher sales. Euromonitor forecasts the value of retail sales of department store operators to increase from Rp30.7 trillion in 2011 to Rp44.1 trillion in 2016 representing a real CAGR of 7.5% (nominal CAGR of 12.8%). Department store sales are expected to increasingly constitute a higher percentage of total apparel13 sales, growing from 30.3% in 2011 to 38.7% in 2016. The chart below sets forth retail value sales for department stores in Rp trillions between 2006 and 2016.

12 Electronics and appliance specialist retailers are forecast to be the fastest growing non-grocery retail format with a retail value sales real CAGR of 15.0% followed by mixed retailers with a real CAGR of 7.5% between 2011 and 2016

13 Please refer to the Euromonitor definitions for Apparel and Department stores. Apparel comprises clothing and footwear while department stores refer to outlets selling mainly non-grocery merchandise

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Chart 24: Retail value sales for department stores (Rp trillions) and real growth rates (2006 - 2016F)

Rp tr Department store sales as % of total apparel sales 50 38.7% 40%

45 36.5% 38% 40 CAGR: ’11 - ’16F:34.6% 7.5% 36%

35 33.0% 34% CAGR: ’06 - ’11: 2.9% 31.6% 30 30.7% 32% 30.0% 30.3% 29.4% 25 28.9% 30% 28.0% 44.1 20 40.7 28% 37.6 32.7 35.0 15 29.0 30.7 26% 26.6 27.8 27.5 27.7 10 24%

5 22%

- 20% 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F 2016F Source: Euromonitor

According to Euromonitor, Indonesia’s apparel market is the largest in Southeast Asia at USD11.7 billion as of 2011. Given positive macroeconomic factors, especially on increasing discretionary wealth and increasing spending on clothing and footwear, Euromonitor forecasts Indonesia’s apparel market to grow at a real CAGR of 2.4% (nominal CAGR of 6.9%) between 2011 and 2016. The chart below sets forth the market size of apparel and footwear market in USD billions for the Selected Countries in 2011.

Chart 25: Market size of apparel market (USD billions) for Selected Countries (2011)

USD bn

USA 331

China 236

Indonesia 12

Thailand 7

Philippines 7

Malaysia 6

Singapore 3

Vietnam 2

Source: Euromonitor | Note: Chart shown is not to scale

Page 173 ------18. INDUSTRY ------

According to Euromonitor, Indonesia is relatively underpenetrated in terms of total department store sales as a percentage of total non-grocery sales, compared to the Selected Countries in 2011. The chart below sets forth the total department store sales as a percentage of total non-grocery retail sales in 2011 for Selected Countries.

Chart 26: Department store sales as a % of total non-grocery retail sales (2011)

Department store sales as a % of total non-grocery retail sales China 17.6%

Philippines 15.4%

Singapore 13.8%

Thailand 13.3%

Malaysia 13.1%

Indonesia 9.1%

USA 8.9%

Vietnam 1.0%

Source: Euromonitor

The potential for continued growth in the Indonesian department store segment is further illustrated by the degree of relative under penetration of the segment as compared to other Asian countries. For example, based on Euromonitor estimates, Indonesia has on an average only 2.7 department stores per million people for the year 2011 as compared to the average of 4.8 department stores per million for Thailand, Philippines, Singapore, Malaysia and China. The chart below sets forth the penetration of number of department stores per million people for Selected Countries in 2011.

Chart 27: Number of department stores per million people for Selected Countries (2011)

Number of department stores per million people

USA 28.8

Singapore 7.2

Malaysia 6.2

China 5.7

Philippines 2.8

Indonesia 2.7

Thailand 1.9

Vietnam 0.1

Source: Euromonitor | Note: Chart shown is not to scale

Page 174 ------18. INDUSTRY ------

Competitive Dynamics

As the leading brand in the Indonesian department store segment by retail value, MDS has continuously increased its market share based on retail sales value, which grew from 23.6% in 2006 to 31.6% in 2011 of the department store segment, as per Euromonitor data.

A number of operators are currently active in the Indonesian department store segment although the competitive landscape is dominated by two major operators, MDS and Ramayana. Management believe that each of the top three department store operators target different customer segments. MDS is the largest department store operator focused on the middle-income consumers. Ramayana is targeting middle-lower and low income consumers segment while Management believe that MAPI typically targets affluent customers in major cities. According to Euromonitor, other department store retailers, excluding MDS, Ramayana and MAPI each have a market share in terms of retail value sales of below 5% in 2011. The charts below set forth the market shares of Indonesian department stores in 2011.

Chart 28: Market shares of Indonesian department stores (2011) Department store market shares as % of retail value 35% 31.6% 30%

25% 22.5%

20%

15%

10% 7.7% 4.4% 5% 3.3% 3.1%

0% MDS Ramayana MAPI Akur Metropolitan Tozy

Source: Euromonitor | Tozy refers to PT Tozy Sentosa

Chart 29: Historical development of market shares of Indonesian department stores (2006 - 2011)

100% 5.1% 5.2% 4.9% 4.8% 4.6% 4.4% 4.9% 4.8% 5.3% 6.6% 6.7% 7.7% 90%

80% 24.0% 23.5% 24.3% 22.8% 23.1% 22.5% 70%

60% 23.6% 24.3% 25.9% 50% 29.0% 30.2% 31.6%

40%

30%

20% 42.5% 42.2% 39.6% 36.9% 35.4% 33.7% 10%

0% 2006 2007 2008 2009 2010 2011

Others MDS Ramayana MAPI Akur Source: Euromonitor

Page 175 ------18. INDUSTRY ------

MDS and Ramayana have the widest regional spread in terms of department store coverage and total selling space. MDS’ stores are present in major cities on Java, as well as other provinces, such as Sumatra, Sulawesi, Bali and Kalimantan, and the eastern part of the archipelago. By contrast, premium department stores such as Debenhams and Seibu are only present in Jakarta, with a limited number of outlets.

Local brands continued to dominate the department stores segment in Indonesia. The only notable international brands are Sogo, Debenhams, Metro and Seibu. These companies typically target affluent consumers in the major cities, especially Jakarta, with minimal adaptation for local tastes and trends. Such brands do not consider local retailers to be significant competitors according to Euromonitor. The charts below set forth, number of outlets of the leading department store retailers in Indonesia in 2009, 2010 and 2011.

Chart 30: Number of department stores of the largest department store players in Indonesia (2009 - 2011)

# of outlets

105107 104 102 95 88

54 52 50

17 16 17

5 6 775 5 6 6 6 333 2 33

MDS Ramayana Akur MAPI Metropolitan Tozy Sarinah Rimo Golden Retailindo

2009 2010 2011 Source: Euromonitor | Note: MDS data as per Euromonitor estimates | Tozy, Sarinah, Rimo and Golden Retailindo refer to PT Tozy Sentosa, PT Rimo Surabaya Lestari and PT Golden Retailindo respectively

TRENDS IN INDONESIAN RETAIL WHICH IMPACT THE DEPARTMENT STORE SEGMENT

Strong and sustainable growth in consumer spending

Accelerating growth in GDP per capita and lower unemployment rates translate into escalating purchasing power amongst consumers as they enjoy higher disposable income levels. As consumer confidence further improves, many Indonesians become more likely to increase their spending on discretionary items, particularly on non- grocery items, such as clothing and footwear, electronics and appliances and home and garden products.

Accelerating modern retail infrastructure expansion in fast-growing second-tier cities

The prospects of mid-sized cities outgrowing Jakarta in terms of population and GDP growth rates are fuelling demand for large commercial real estate developments in mid-sized cities. Leading property developers such as Sinar Mas, Ciputra and Lippo Karawaci are increasingly looking to tap into middle-income demand for high quality shopping malls in mid-sized cities such as Makassar, Pekanbaru in Sumatra and Balikpapan in Borneo. Several such shopping malls were established in various cities in Indonesia in 2011, including Trans Studio Mall in Makassar, and Summarecon Mall II in Tangerang and Ciputra World in Surabaya. This trend benefits mixed retailers, especially department stores, which are predominantly located in shopping malls.

Management expects the development of large commercial real estate projects in mid-sized cities to continue to rise as developers and modern retailers target to capture the benefits of economic growth in these cities. For example, Lippo Karawaci announced14 its plan to build 28 new malls by 2015 and 50 new malls by 2020 in

14 Lippo website at http://www.lippokarawaci.co.id/corporateNewsAndEvents/news02.aspx?ref=523

Page 176 ------18. INDUSTRY ------places such as Surabaya, Solo, Yogyakarta, Bali, and Palembang. Improving infrastructure in a growing number of mid-sized cities across Indonesia provides significant expansion opportunities, particularly for those department store retailers that target the middle-income consumer segment.

Increasing popularity of private label products

According to Euromonitor, going into 2011, Indonesian consumers have been increasingly exposed to, and accepting of private label products. The increasing consumer acceptance of private label in 2011 was underpinned by two factors. From the demand side, there was growing consumer demand, especially from low to middle-income consumers, for more affordable private label products. From the supply side, the growing presence of modern retail outlets in many cities in Indonesia, and retailers aggressive promotional efforts to push their private label lines, contributed significantly to the greater recognition and acceptance of private label products. Private label products in Indonesia are sold primarily by the leading grocery and department store retailers, including MDS, Matahari Putra Prima, Carrefour Indonesia, Hero Supermarket, Lion Superindo and Sumber Alfaria Trijaya.

Increasing competition, especially amongst retailers targeting the upper middle or high income customers in major urban areas

Attracted by Indonesia’s positive economic growth prospects, 2011 witnessed a number of new international retailers entering Indonesia’s major cities, especially Jakarta. These retailers include department store retailers Lotte Department Store, as well as speciality store retailers such as Bershka, Stradivarius and Payless. Taking advantage of the higher disposable incomes of urban consumers, more international department store retailers are expected to enter the country, particularly targeting the upper middle or high income segment in Indonesia’s major cities. Parkson Retail Group entered Indonesia through the acquisition of Centro which caters to the middle-income segment and announced its intention to open new stores (starting in St. Moritz Shopping Mall, Jakarta) under its middle-to-high end focused Parkson banner. Central Retail Corporation is scheduled to open its first store in 2014 in Central Jakarta, which is expected to target the middle-to-high end segment.

Page 177 ------19. REGULATION ------

OVERVIEW

Indonesian retail businesses are regulated at both the national and regional level. The regulations contain specific restrictions on foreign ownership and require the Company to obtain and maintain a number of licences.

FOREIGN OWNERSHIP IN RETAIL INDUSTRY

Under the Presidential Regulation No. 36 of 2010 (“PR 36/2010”), department stores with a sales area of less than 2,000 square meters must be 100% Indonesian owned. Accordingly, due to its foreign ownership, the Company’s stores must each have a minimum sales area of 2,000 square metres.

KEY REGULATIONS REGARDING RETAIL BUSINESS ACTIVITIES BY FOREIGN INVESTMENT COMPANIES (“PMA”)

Š The Company may not operate as a wholesaler: Government Regulation No. 36 of 1977 on the Termination of Foreign Company Activity in the Field of Trade (as last amended by Government Regulation No. 15 of 1998) prohibits a PMA retail company from acting simultaneously as a wholesaler. The basic distinction between a retailer and a wholesaler is that a retailer sells goods in single packaging or small quantities to end-consumers, while a wholesaler sells goods in large quantities to end-consumers through other intermediaries. As at the date of this Offering Circular, the Company is not operating as a wholesaler.

Š Exports and Imports: Government Regulation No. 2 of 1996 on Activities of Companies Established in the Framework of Foreign Investment in the Fields of Export and Import (as last amended by Government Regulation No. 46 of 1998) stipulates that PMA companies are allowed to export their own products and products of others in domestic production and can also act as a general importer. The Company does not export any of its goods but sources a proportion of its goods from overseas via local import agents.

LICENCES

In undertaking its retail business, the Company is required to hold the following licences.

Š a trade business licence (Surat Izin Usaha Perdagangan or “SIUP”): A SIUP is required by any company which intends to conduct trading activities. The type of SIUP required depends on the scale of the company, i.e. a small SIUP, a medium SIUP, or a large SIUP. Trading companies are defined as any type of business entity engaging in the trading sector to gain profit and that are permanent, sustainable, established, and operated and domiciled within Indonesia. A SIUP is valid for as long as the company carries out its business activities, and it must be re-registered every five years. Any SIUP holder who violates the provisions of the Minister of Trade Regulation No. 36/M-DAG/PER/9/2007 regarding the Issuance of Trade Business Licences (as last amended by Minister of Trade Regulation No. 39/M-DAG/ PER/12/2011) may be subject to an administrative sanction in the form of a written warning, a temporary suspension of the SIUP, or a revocation of the SIUP. The Company’s main office is registered as a large SIUP, and the last re-registration of its SIUP was made on 30 December 2008.

Š a modern store business licence (“IUTM”): IUTM’s are issued by the Head of Regency/Mayor or the Governor of Jakarta and are required of all department stores. In line with the spirit of local autonomy, each Head of Regency/Mayor is authorised to impose further technical requirements for the grant of such license, as contemplated in each respective regional regulation. In general, the relevant authorities delegate the authorisation for issuing these licences to the Head of Office/Unit in charge of trade affairs in the region or city where the new department store will operate. Each IUTM is applicable for only one business location and is valid for as long as the company carries out its business activities in the location specified in the IUTM. The Company is required to have a separate IUTM for each of its stores. There is a requirement to re-register such licences every five years. If the store changes location a new licence application must be submitted. Under Article 21 of MOT Regulation No. 53/M-DAG/PER/12/2008 (“MOT Regulation No. 53/2008”), if a business owner fails to re-register, the business may be subject to

Page 178 ------19. REGULATION ------

administrative sanctions in the form of suspension or revocation of the business licence. A company which already has an IUTM for a store is not required to have a SIUP for that store.

Š nuisance licences. Nuisance licenses are required under Staatsblad 1926-226 on Nuisance Law (as amended) for business activities which might cause hazards or disturb surrounding public areas. If the Company fails to obtain a nuisance licence it may be subject to a fine or its management may be subject to imprisonment. The Company is also required to obtain several provincial nuisance licences.

Š a private market business licence (“IPUPS”): An IPUPS must be obtained from the Governor of Jakarta to enable the Company to operate a private market (Perpasaran Swasta), which includes department stores, in Jakarta. A private market is defined in applicable regulations as being the activities of business operation and supply of facilities/place of business by the private sector (non-governmental parties). The licence is valid for as long as the Company carries out its business activities and must be renewed every five years. If the Company fails to obtain/renew such licence it may be subject to administrative sanctions including sanctions in the form of written warnings, revocation of licences, a fine up to a maximum amount of Rp5 million or imprisonment of its management for up to three months.

Further, the Company employs foreign employees in various positions, including in its Board of Management, Board of Directors and Board of Commissioners. Pursuant to the applicable Indonesian laws and regulation below, all the Company’s foreign employees are subject to requirements for a permit to employ foreign employees (izin mempekerjakan tenaga kerja asing)(“IMTA”) and the limited stay permit (izin tinggal sementara)(“ITAS”), as follows.

Š IMTA. An IMTA is required under Law No. 13 of 2003 on Employment and Minister of Manpower and Transmigration Regulation No. PER.02/MEN/III/2008 on Foreign Employee Utilisation Procedure, for a Company which employs foreign employees. An IMTA shall be obtained by the Company for each foreign employee employed. The foreign employee may be employed in a certain position and for a certain period of time. The employment relationship shall consist of work, salary and assignment elements between the employer and the worker. Failure to obtain an IMTA may result in sanctions such as the imprisonment of management for a period of between one to four years and/or a fine between Rp100 million to Rp400 million.

Š ITAS. An ITAS must be obtained by a foreigner who stays in the Indonesian territory. An ITAS is granted to the foreigner in a form of a card which usually known as the limited stay permit card (kartu izin tinggal terbatas/KITAS). Pursuant to Law No. 6 of 2011 on Immigration, any person who hides or protects or gives work to a foreigner who is discovered or suspected to stay in the Indonesian territory without a permit, is subject to imprisonment for a maximum of two years and/or a fine of up to Rp200 million and any foreigner who enters and/or stays in the Indonesian territory without the relevant permit may be deported and/or subject to imprisonment for a maximum of five years and/or a fine of Rp500 million.

REGULATION OF MODERN STORES

The Company is subject to certain provisions of Presidential Regulation No. 112 of 2007 concerning Organisation and Supervision of Traditional Markets, Shopping Centres and Modern Stores (Penataan dan Pembinaan Pasar Tradisional, Pusat Perbelanjaan dan Toko Modern)(“PR No. 112/2007”) and MOT Regulation No. 53/2008 (an implementing regulation of PR No. 112/2007). The Company’s stores fall within the definition of “modern stores”, which includes department stores, and the following conditions are applicable to such stores.

Š Zoning and Construction: The locations of modern stores must comply with the regency/city area spatial plan (Rencana Tata Ruang Wilayah) and the regency/city detail spatial plan including zoning regulation. Department stores may not be located on neighbourhood road networks or residential areas within cities.

Page 179 ------19. REGULATION ------

In relation to the construction of a modern store (except minimarkets), an analysis must be made of the social and economic conditions of the community, and of the existence of traditional markets and micro, small and medium businesses that are located in the area where the modern store will be constructed. The analysis must be made by a competent independent body or organisation. The results of the analysis are required as part of the supporting documents for obtaining licences to establish or operate a modern store (except minimarkets).

Š Size: A modern store must also comply with specific sales floor area and location requirements. Department stores must be more than 400 square metres in floor area (and more than 2,000 square meters if they are not wholly owned through domestic investment in Indonesia).

Š Cooperation with small and medium scale businesses (“UMKM”): Modern stores are also required to provide certain types of cooperation with UMKM. Cooperation may be conducted in the form of marketing UMKM products that are packaged or repackaged with the trademark of the product owner, modern store or other agreed trademark to improve the products’ sale value or marketing UMKM products in a display window or outlet of the modern store. UMKM is also exempted from listing fee requirements that may be imposed on a modern store. Breach of the regulations could result in administrative sanctions (i.e. written warning, suspension and revocation of business licence).

Page 180 ------20. PLAN OF DISTRIBUTION ------

THE OFFERING

The Selling Shareholders are offering 1,167,170,000 of the Company’s Shares and the Over-allotment Shareholder is offering up to 175,075,500 additional Over-allotment Shares pursuant to the Over-allotment Option described below (together being the Offer Shares).

The Offer Shares are being offered by the Selling Shareholders in the United States only to qualified institutional buyers in reliance on an exemption from registration under the US Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The Offer Shares are being offered outside the United States in offshore transactions in accordance with Regulation S.

The Offer Shares are being offered by the Selling Shareholders in Indonesia to not more than 100 persons and sold to not more than 50 persons through a private placement in Indonesia.

The Offer Shares are being offered by the Selling Shareholders in Malaysia through a private placement to persons falling within paragraphs 2(g)(i) to (xi) of Schedule 5 of the CMSA through a holder of a Capital Markets Services Licence who carries on the business of dealing in securities. This Offering Circular does not constitute and may not be used for the purpose of a public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Securities Commission Malaysia under the CMSA.

Certain restrictions that apply to the distribution of this Offering Circular and the Offer Shares being sold under the Offering in certain jurisdictions are described below.

Under the terms and conditions contained in the underwriting agreement entered into by and among the Company, the Selling Shareholders, MAC and the Joint Global Coordinators and Joint Bookrunners named below dated 25 March 2013 (the “Underwriting Agreement”), the Selling Shareholders have agreed to sell to the Joint Global Coordinators and Joint Bookrunners or, as the case may be, purchasers procured by the Joint Global Coordinators and Joint Bookrunners, and each of the Joint Global Coordinators and Joint Bookrunners, severally and not jointly, has agreed to purchase, or to procure purchasers for, the number of Offer Shares listed opposite its name in the table below. The table below does not reflect the exercise of the Over-allotment Option.

Number of % of Total Joint Global Coordinators and Joint Bookrunners Offer Shares Offer Shares CIMB Bank (L) Limited ...... 389,056,667 33.33 Morgan Stanley & Co. International plc ...... 389,056,667 33.33 UBS AG, Singapore Branch ...... 389,056,666 33.33 Total ...... 1,167,170,000 100

Purchasers of the Offer Shares may be required to pay brokerage fees (and if so required, such brokerage fees will be up to 1.0% of the Offer Price), crossing fees, taxes, duties or levies and other similar charges in accordance with the law and practices of the country of purchase, in addition to the Offer Price for such Offer Shares.

PT Mandiri Sekuritas, Maybank Kim Eng Securities Pte Ltd and Standard Chartered Securities (Singapore) Pte. Limited are acting as Co-Lead Managers. They do not have any underwriting commitment to purchase Offer Shares and will not be distributing any Offer Shares in this Offering.

UNDERWRITING ARRANGEMENTS

The Joint Global Coordinators and Joint Bookrunners have entered into commitments under the Underwriting Agreement.

Prior to completion of the Offering, the Company, the Selling Shareholders and the Joint Global Coordinators and Joint Bookrunners, each retain the right to cancel the Offering under certain circumstances under the Underwriting Agreement which are typical for an agreement of this nature. If this right is exercised, the Offering

Page 181 ------20. PLAN OF DISTRIBUTION ------and the underwriting arrangements will lapse. The Underwriting Agreement provides for the Joint Global Coordinators and Joint Bookrunners to be paid commission in respect of the Offer Shares (including Over- allotment Shares) sold. Any commissions received by the Joint Global Coordinators and Joint Bookrunners may be retained, and any Shares acquired by them may be retained or dealt in, by them, for their own benefit.

Pursuant to the Underwriting Agreement:

Š the Selling Shareholders have agreed, subject to certain conditions, to sell in aggregate 1,167,170,000 Offer Shares (excluding the Over-allotment Shares) in the Offering at the Offer Price;

Š the Joint Global Coordinators and Joint Bookrunners have severally agreed, subject to certain conditions, to purchase or procure purchasers who will purchase the Offer Shares (excluding the Over-allotment Shares) (in such proportions as will be set out in the Underwriting Agreement);

Š the Joint Global Coordinators and Joint Bookrunners will deduct from the proceeds of the Offering to the Selling Shareholders a commission of 0.9% of the product of the Offer Price and the number of Offer Shares sold in the Offering (including following any exercises of the Over-allotment Option) which will be paid to the Joint Global Coordinators and Joint Bookrunners pro rata to their respective underwriting commitments. Additionally, 0.1% of the product of the Offer Price and the number of Offer Shares sold in the Offering (including following any exercises of the Over-allotment Option) will be paid to the Co- lead Managers and allocated between them at the sole discretion of ACC and MAC. In addition, a commission of 0.5% of the product of the Offer Price and the number of Offer Shares sold in the Offering (including following any exercises of the Over-allotment Option) will be paid to the Joint Global Coordinators and Joint Bookrunners by ACC and MAC and allocated between the Joint Global Coordinators and Joint Bookrunners in the sole discretion of ACC and MAC;

Š the obligations of the Joint Global Coordinators and Joint Bookrunners to purchase or procure purchasers for the Shares on the terms of the Underwriting Agreement are subject to certain conditions. These conditions include the absence of any breach of the representations and warranties under the Underwriting Agreement; and

Š each of the Company and the Selling Shareholders have given certain representations, warranties and undertakings and indemnities to the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers.

ALLOCATION

The Offer Shares allocated under the Offering have been underwritten, subject to certain conditions, by the Joint Global Coordinators and Joint Bookrunners as described below in the paragraph headed “Underwriting Arrangements”. Allocations under the Offering will be determined at the discretion of ACC. All Offer Shares sold under the Offering will be sold, payable in full, at the Offer Price. For information about tax liability, see Section 22 – “Taxation”.

DEALING ARRANGEMENTS

The Offering is subject to the satisfaction of certain conditions contained in the Underwriting Agreement, which are typical for an agreement of this nature. Certain conditions are related to events which are outside the control of the Company, the Directors, Management and the Joint Global Coordinators and Joint Bookrunners.

Each investor will be required to undertake to pay the Offer Price for the Offer Shares sold to such investor in such manner as shall be directed by the Joint Global Coordinators and Joint Bookrunners.

DELIVERY OF SHARES

The Company and the Selling Shareholders expect that the delivery of the Offer Shares will be made against payment therefor on or about 28 March, 2013.

Page 182 ------20. PLAN OF DISTRIBUTION ------

REGISTRATION OF THE SHARES IN KSEI

The Shares have been registered into the depository facilities of KSEI in accordance with an agreement entered into between KSEI and the Company.

Prior to completion of the Offering, the Selling Shareholders will instruct KSEI to issue a confirmation of registration in the register of Shares, in the name of the Selling Shareholders, of the Shares. The Selling Shareholders will then instruct KSEI to credit the Offer Shares to a designated account with KSEI to receive and hold the Shares allotted. The broker or custodian bank of the Selling Shareholders will then instruct KSEI to distribute the number of Shares allotted to an investor from their securities accounts to the securities account of the relevant KSEI participant.

The transfer of Shares held with KSEI will be by way of electronic book-entry between securities accounts. Any shareholder holding Shares through KSEI will be entitled to withdraw its Shares and receive a share certificate registered in its name. Only those Shares which are registered in KSEI will be tradable over the IDX.

All rights attaching to Shares held with KSEI, including dividends, interest bonuses and other ownership entitlements on securities will be automatically distributed by KSEI to a beneficial shareholder holding through the depository system via its KSEI participant who holds the Shares on such beneficial shareholder’s behalf. Under Article 60 of the Indonesian Capital Market Law, the KSEI participant is obliged to immediately pass such rights and entitlements onto its customers.

Prior to corporate action being taken by the Company, KSEI must provide details to the Company concerning the share entitlements of all the beneficial Shareholders on whose behalf Shares are held. A KSEI participant is obliged to notify a beneficial shareholder of the exercise of any pre-emptive rights, delivery of offering circulars and other notices by the Company as well as notices of general meetings of Shareholders. The beneficial shareholder, the KSEI participant it holds through, or its legal representative, has the right to be present and vote at the general meetings of Shareholders.

KSEI is obliged to give the Company details on the KSEI participants holding Shares on behalf of beneficial Shareholders either:

Š within one business day after the record date set for the purposes of assessing the identity of the Shareholders entitled to a dividend or other such rights attaching to Shares which have been declared by the Company; or

Š prior to the holding of a general meeting of Shareholders; or

Š at the request based on an instruction from an authorised person or agency to the Company in accordance with the prevailing laws and regulations.

A beneficial shareholder that wishes to obtain a share certificate may withdraw its Shares from the depository once all of those Shares have been distributed to the securities account of its KSEI participant. An application for the withdrawal of Shares must be forwarded to KSEI by the KSEI participant, on behalf of the beneficial shareholder, in a specified form. Collective share certificates in the name of the beneficial shareholder will be issued by the Company’s share registrar for any Shares that are withdrawn from KSEI no later than five business days from the receipt of the withdrawal request by KSEI, unless KSEI rejects the withdrawal of Shares based on written orders from OJK or certain other authorised persons if required for the purposes of civil or criminal court proceedings. Only Shares remaining in KSEI, and which have not been pledged, foreclosed upon based on a court order, seized for the purposes of criminal court investigation, or subject to any mandatory lock-up can be traded on the IDX. Investors wishing to trade withdrawn Shares on the IDX must return them to KSEI. The process of depositing withdrawn Shares can take up to five business days.

Page 183 ------20. PLAN OF DISTRIBUTION ------

CORNERSTONE INVESTORS

Concurrent with and as part of the Offering, each of the entities listed below (the “Cornerstone Investors”, and each a “Cornerstone Investor”) have entered into a cornerstone purchase agreement with ACC and the Joint Global Coordinators and Joint Bookrunners to purchase Offer Shares (the “Cornerstone Shares”) from ACC at the Offer Price. This represents approximately 33% of the Offer Shares (excluding the Over-allotment Shares).

The Offering is not conditional on the completion of the purchase of the Cornerstone Shares by any of the Cornerstone Investors. No special rights are granted to any Cornerstone Investor under the cornerstone purchase agreements.

Cornerstone Investors may also participate in the Offering by purchasing Offer Shares in addition to their Cornerstone Shares. The purchase of Cornerstone Shares will not limit the number of Shares which the Cornerstone Investors may purchase as part of the Offering. Other than GIC (see Section 15 – “Corporate and Shareholding Structure”), no Cornerstone Investor currently holds, or is expected as a result of their purchase of Cornerstone Shares to hold, 5% or more of the Company’s issued share capital.

The Cornerstone Investors

Azentus Global Opportunities Master Fund Limited

BlackRock Asset Management North Asia Limited – Fundamental Equities Portfolio Management Group – APAC Investment Team

Capital Research and Management Company

Employees Provident Fund Board

FIL Investment Management (Hong Kong) Limited

Fullerton Fund Management Company Ltd (a wholly owned subsidiary of Temasek)

Goldman Sachs Profit Sharing Master Trust

Gordel Capital Limited

Government of Singapore Investment Corporation Private Limited

GS Investment Strategies, LLC

Hwang Investment Management BHD

Morgan Stanley Investment Management Company

Myriad Opportunities Master Fund Limited

OZ Asia Master Fund, Ltd.

OZ Equity Long-Short Master Fund, Ltd.

OZ Eureka Fund, L.P.

OZ Global Special Investments Master Fund, L.P.

OZ ELS Master Fund, Ltd.

Page 184 ------20. PLAN OF DISTRIBUTION ------

OZ Master Fund, Ltd

OZEA, L.P.

PT Schroder Investment Management Indonesia

Quantum Partners LP

T.Rowe Price Hong Kong Limited

DECLARATION OF INTEREST

Each Joint Global Coordinator and Joint Bookrunner and each Co-Lead Manager and their respective affiliates have, from time to time, engaged in, and may in the future engage in, investment banking, financing, private banking, commercial banking or financial consulting activities and other commercial dealings in the ordinary course of business with the Company, the Selling Shareholders and their respective affiliates. They have received and expect to continue to receive customary fees and commissions for these activities and dealings. In addition, in the ordinary course of business, each Joint Global Coordinator and Joint Bookrunner and each Co-Lead Manager and its affiliates may trade the Company’s securities or the securities of the Company’s affiliates or derivatives relating to the foregoing securities for its and/or its affiliates’ own account and/or for the accounts of customers, and may at any time hold a long or short position in such securities.

OVER-ALLOTMENT AND STABILISATION

In connection with the Offering, UBS AG, Singapore Branch or its affiliates, as Stabilising Manager, and any of its agents, including PT UBS Securities Indonesia, may (but will be under no obligation to), after consultation with the Joint Global Coordinators and Joint Bookrunners to the extent permitted by applicable law, over-allot Shares or effect other stabilising transactions with a view to stabilising or maintaining the market price of the Shares at a higher level than that which might otherwise prevail in the open market after the Offering. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over the counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on 26 March 2013 and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares at or above the Offer Price. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilising transactions conducted for the Offering.

For the purposes of allowing the Stabilising Manager to cover short positions resulting from any such over- allotments and/or from sales of Shares effected by it during the stabilising period, the Over-allotment Shareholder has granted to the Stabilisation Manager, on behalf of the Joint Global Coordinators and the Joint Bookrunners, the Over-allotment Option, under which the Stabilising Manager, on behalf of the Joint Global Coordinators and the Joint Bookrunners, may purchase or procure purchasers for additional Shares up to a maximum of 175,075,500 Over-allotment Shares at the Offer Price. The Over-allotment Option will be exercisable in whole or in part, upon notice by the Stabilising Manager, at any time during the period commencing on 26 March 2013 and ending 30 calendar days thereafter. Any Over-allotment Shares made available under the Over-allotment Option will rank pari passu in all respects with the Offer Shares, including for all dividends and other distributions declared, made or paid on the Offer Shares, will be purchased on the same terms and conditions as the Offer Shares and will form a single class for all purposes with the other Offer Shares.

STOCK LENDING ARRANGEMENTS

In connection with settlement and stabilisation, the Stabilising Manager, on behalf of the Joint Global Coordinators and Joint Bookrunners, has entered into a stock lending arrangement with ACC (the “Lending

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Shareholder”) under which it will be able to borrow up to a maximum of 175,075,500 Shares for the purposes, amongst other things, of facilitating settlement of the over-allotment of Shares in connection with the Offering. If the Stabilising Manager borrows any Shares under the stock lending arrangement, it will be required to return a number of equivalent Shares to the Selling Shareholders by no later than 30 days following the completion of the Offering or such later date as the Lending Shareholders and the Joint Global Coordinators may agree in writing.

LOCK UP ARRANGEMENTS

Except pursuant to the Offering (including pursuant to the exercise of the Over-allotment Option), the Reorganisation and a Permitted Disposal (as defined below) by a Selling Shareholder or MAC, the Company, the Selling Shareholders and MAC have agreed with the Joint Global Coordinators and Joint Bookrunners not to, for a period of six months following completion of the Offering (the “Lock-Up End Date”) without the prior written consent of the Joint Global Coordinators and Joint Bookrunners: (A) issue (in the case of the Company), offer, sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any option, warrant, contract or right to purchase, grant or purchase any option, warrant, contract or right to sell, or otherwise transfer or dispose of or create an encumbrance over, or agree to transfer or dispose of or create an encumbrance over, either directly or indirectly, conditionally or unconditionally, any Shares or securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase any Shares (collectively, the “Locked-up Securities”) or any interest in any of the foregoing; (B) deposit any Locked-up Securities in any depositary receipt facilities, whether such transaction described above is to be settled by delivery of Shares or other securities, in cash or otherwise; (C) enter into any swap, hedge or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Locked-up Securities, whether such swap, hedge or transaction is to be settled by delivery of Shares or other securities, in cash or otherwise; or (D) or publicly announce any intention to enter into, any transaction described in paragraphs (A), (B) or (C) above, whether any such transaction described in clauses (A), (B) or (C) above is to be settled by delivery of Shares or other securities, in cash or otherwise. A “Permitted Disposal” is, in respect of the Selling Shareholders and MAC only, (i) an acceptance of a general offer for the Shares of the Company (“MTO”) made by a new controlling shareholder in accordance with the Bapepam-LK Rules No. IX.H.1 (the “Indonesia Take-over Code”) to be followed by the sale of the Shares to the new controlling shareholder during the MTO period (within the meaning of the Indonesia Take-overs Code; (ii) the distribution of all of the Shares held by ACC to MAC, provided that all such Shares continue to be Locked-up Securities for the reminder of the period to the Lock-Up End Date; (iii) the sale of all of the Shares held by ACC or MAC (as applicable) to a strategic purchaser, provided that the relevant seller procures as a condition of the sale that the purchaser enters into a lock up undertaking with the Underwriters for the remainder of the period to the Lock-Up End Date on substantively same terms as above or (iv) any transaction that is required by applicable law.

STAMP DUTY

Any investor buying Offer Shares may be required to pay stamp duty and other charges in accordance with the laws and practices of the jurisdiction of purchase in addition to the Offer Price indicated on the cover page of this Offering Circular.

USE OF PROCEEDS

As the Offering will consist solely of Offer Shares offered by the Selling Shareholders, the Company will not receive any proceeds from the Offering.

SELLING AND TRANSFER RESTRICTIONS

The distribution of this Offering Circular and the offer of Offer Shares in certain jurisdictions may be restricted by law and therefore persons into whose possession this Offering Circular comes should inform themselves about and observe any restrictions, including those set out in the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

No action has been or will be taken in any jurisdiction that would permit a public offering of the Shares, or possession or distribution of this Offering Circular or any other offering material in any country or jurisdiction

Page 186 ------20. PLAN OF DISTRIBUTION ------where action for that purpose is required. Accordingly, the Offer Shares may not be offered or sold, directly or indirectly, and neither this Offering Circular nor any other offering material or advertisement in connection with the Offer Shares may be distributed or published in or from any country or jurisdiction except in circumstances that will result in compliance with any and all applicable rules and regulations of any such country or jurisdiction. Persons into whose possession this Offering Circular comes should inform themselves about and observe any restrictions on the distribution of this Offering Circular and the offer of Offer Shares contained in this Offering Circular. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This document does not constitute an offer to purchase any of the Offer Shares to any person in any jurisdiction to whom it is unlawful to make such offer of solicitation in such jurisdiction.

Australia

This document (a) does not constitute a prospectus or a product disclosure statement under the Corporations Act 2001 of the Commonwealth of Australia (“Corporations Act”); (b) does not purport to include the information required of a prospectus under Part 6D.2 of the Corporations Act or a product disclosure statement under Part 7.9 of the Corporations Act; has not been, nor will it be, lodged as a disclosure document with the Australian Securities and Investments Commission (ASIC), the Australian Securities Exchange operated by ASX Limited or any other regulatory body or agency in Australia; and (c) may not be provided in Australia other than to select investors (Exempt Investors) who are able to demonstrate that they (i) fall within one or more of the categories of investors under Section 708 of the Corporations Act to whom an offer may be made without disclosure under Part 6D.2 of the Corporations Act and (ii) are “wholesale clients” for the purpose of Section 761G of the Corporations Act.

The Offer Shares may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for, or buy, the Offer Shares may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any Offer Shares may be distributed, received or published in Australia, except where disclosure to investors is not required under Chapters 6D and 7 of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the Shares, each purchaser of Offer Shares represents and warrants to the Company, the Selling Shareholder, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers and their affiliates that such purchaser or subscriber is an Exempt Investor.

As any offer of Offer Shares under this Offering Circular, any supplement or accompanying prospectus or other document will be made without disclosure in Australia under Parts 6D.2 and 7.9 of the Corporations Act, the offer of those Offer Shares for resale in Australia within 12 months may, under the Corporations Act, require disclosure to investors if none of the exemptions in the Corporations Act applies to that resale. By applying for the Offer Shares each purchaser of Offer Shares undertakes to the Company, the Selling Shareholder, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers and their affiliates that such purchaser will not, for a period of 12 months from the date of purchase of the Shares, offer, transfer, assign or otherwise alienate those Offer Shares to investors in Australia except in circumstances where disclosure to investors is not required under the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.

Bahrain

This Offering Circular has not been reviewed by the Central Bank of Bahrain. This Offering Circular may not be circulated within the Kingdom of Bahrain nor may any interests in the Company be offered for subscription or sold, directly or indirectly, nor may any invitation or offer to subscribe for any Offer Shares in the Company be made to persons in the Kingdom of Bahrain. Neither the Central Bank of Bahrain nor the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers are responsible for the performance of the Company.

Canada

The Offer Shares may not be offered or sold, directly or indirectly, in any province or territory of Canada or to or for the benefit of any resident of any province or territory of Canada except pursuant to an exemption from the

Page 187 ------20. PLAN OF DISTRIBUTION ------requirement to file a prospectus in the province or territory of Canada in which the offer or sale is made and only by a dealer duly registered under applicable laws in circumstances where an exemption from applicable registered dealer registration requirements is not available.

Dubai International Financial Centre

This Offering Circular relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This Offering Circular is intended for distribution only to Persons of a type specified in those rules. It must not be delivered to, or relied on by, any other Person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The Dubai Financial Services Authority has not approved this Offering Circular nor taken steps to verify the information set out in it, and has no responsibility for it.

The Offer Shares to which this Offering Circular relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Offer Shares offered should conduct their own due diligence on the Offer Shares. If you do not understand the contents of this Offering Circular you should consult an authorised financial adviser. The Offer Shares have not been and will not be offered, sold or publicly promoted or advertised in the Dubai International Financial Centre other than in compliance with laws applicable in the Dubai International Financial Centre, governing the issue, offering or the sale of securities.

European Economic Area

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) no Offer Shares have been offered or will be offered under the Offering to the public in that Relevant Member State prior to the publication of a prospectus for the Offer Shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that offers of Offer Shares may be made to the public in that Relevant Member State at any time under the following exemptions under the Prospectus Directive, if they are implemented in that Relevant Member State:

(a) to any legal entity which is a qualified investor as defined under the Prospectus Directive;

(b) to fewer than 100, or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the Joint Global Coordinators and Joint Bookrunners for any such offer; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Offer Shares shall result in a requirement for the publication of a prospectus under Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State.

For the purposes of this provision, the expression an “offer to the public” for any Offer Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Offer Shares to be offered so as to enable an investor to decide to purchase any Shares, as the same may be varied in that member state by any measure implementing the Prospectus Directive in that member state. The expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

In the case of any Offer Shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged and

Page 188 ------20. PLAN OF DISTRIBUTION ------agreed that the Offer Shares acquired by it in the Offering have not been acquired on a non discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to persons in circumstances which may give rise to an offer of any Offer Shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the Joint Global Coordinators and Joint Bookrunners has been obtained to each such proposed offer or resale. The Company, the Selling Shareholder, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers and their affiliates, and others will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement. Notwithstanding the above, a person who is not a qualified investor and who has notified the Joint Global Coordinators and Joint Bookrunners of such fact in writing may, with the prior consent of the Joint Global Coordinators and Joint Bookrunners, be permitted to acquire Offer Shares in the Offering.

Hong Kong

The Offer Shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and (ii) no advertisement, invitation or document relating to the Shares, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Offer Shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance has been or will be issued, whether in Hong Kong or elsewhere.

Indonesia

The Offering shall not be meant as a public offering by a Shareholder, the Company, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers pursuant to Indonesian capital market laws and regulation. No offer of Offer Shares is being made to Indonesian persons under this Offering Circular, except through a private placement in Indonesia; provided that the Offering is not made through the public media in Indonesia and the Offer Shares are not offered to more than 100 persons in Indonesia or sold to more than 50 persons in Indonesia.

Japan

The Offer Shares have not been, and will not be, registered under the Financial Instruments and Exchange Act of Japan (the “FIEL”) and disclosure under the FIEL has not been, and will not be, made with respect to the Shares. Neither the Offer Shares nor any interest therein may be offered, sold, resold, or otherwise transferred, except under an exemption from the registration requirements of, and otherwise in compliance with, the FIEL and all other applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities. As used in this paragraph, a resident of Japan is any person that is resident in Japan, including any corporation or other entity organised under the laws of Japan.

Kuwait

The Offer Shares have not been registered, authorised or approved for offering, marketing or sale in the State of Kuwait pursuant to Securities and Investment Funds Law of Kuwait No. 31/1990, as amended, and its executive by-law, and as such the Offer Shares shall not be offered or sold in the State of Kuwait. Interested investors from the State of Kuwait who approach the Selling Shareholder, the Company, any of the Joint Global Coordinators and Joint Bookrunners or the Co-Lead Managers acknowledge this restriction and that this offering and any related materials shall be subject to all applicable foreign laws and rules; therefore, such investors must not disclose or distribute such materials to any other person.

Malaysia

No prospectus which complies with the requirements of the CMSA and the guidelines of the Securities Commission Malaysia has been registered with the Securities Commission Malaysia under the CMSA or with

Page 189 ------20. PLAN OF DISTRIBUTION ------any other regulatory body in Malaysia. The Offer Shares will only be made available and offered for sale to persons falling within any of paragraphs 2(g)(i) to (xi) of Schedule 5 of the CMSA, provided that the distribution of such Offer Shares is made by a holder of a Capital Markets Services Licence who carries on the business of dealing in securities. This Offering Circular does not constitute and may not be used for the purpose of a public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Securities Commission Malaysia under the CMSA.

People’s Republic of China

This Offering Circular may not be circulated or distributed in the People’s Republic of China (excluding, for the purposes of this paragraph, the Hong Kong and Macau Special Administrative Regions and Taiwan Province) and the Offer Shares may not be offered or sold directly or indirectly to any resident of the People’s Republic of China, or offered or sold to any person for reoffering or re-sale directly or indirectly to any resident of the People’s Republic of China except under applicable laws and regulations of the People’s Republic of China.

Qatar

This Offering Circular has not been filed with, reviewed or approved by the Qatar Central Bank, any other relevant Qatar governmental body or securities exchange. This Offering Circular is being issued to a limited number of sophisticated investors and should not be provided to any person other than the original recipient. It is not for general circulation in the State of Qatar and should not be reproduced or used for any other purpose.

Saudi Arabia

No action has been or will be taken in the Kingdom of Saudi Arabia that would permit a public offering or private placement of the Offer Shares in the Kingdom of Saudi Arabia, or possession or distribution of any offering materials in relation thereto. The Offer Shares may only be offered and sold in the Kingdom of Saudi Arabia through persons authorised to do so in accordance of Part 5 (Exempt Offers) of the Offers of Securities Regulations dated 20/8/1425 AH corresponding to 4/10/2004 (as amended), or the Regulations, and in accordance with Part 5 (Exempt Offers) Article 16(a)(3) of the Regulations, the Offer Shares will be offered to no more than 60 offerees in the Kingdom of Saudi Arabia with each such offeree paying an amount not less than Saudi Riyals one million or an equivalent amount in another currency. Investors are informed that Article 19 of the Regulations places restrictions on secondary market activity with respect to the Shares. Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with the above-stated restrictions shall not be recognised by us. Prospective purchasers of the Offer Shares should conduct their own due diligence on the accuracy of the information relating to the Shares. Investors should consult an authorised financial adviser if they do not understand the contents of this Offering Circular.

Singapore

This Offering Circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Offering Circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Offer Shares may not be circulated or distributed, nor may Offer Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor as defined under Section 275(2) and under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”), (ii) to a relevant person as defined under Section 275(2) and under Section 275(1), or any person under Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise under, and in accordance with the conditions of, any other applicable provision of the SFA.

Where Offer Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units

Page 190 ------20. PLAN OF DISTRIBUTION ------

of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Offer Shares under an offer made under Section 275 of the SFA except:

(1) to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person under an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than USD200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

(2) where no consideration is or will be given for the transfer; or

(3) where the transfer is by operation of law.

South Korea

The Offer Shares have not been and will not be registered under the Securities and Exchange Act of Korea and none of the Offer Shares may be offered or sold, directly or indirectly, in Korea or to any resident of Korea or to any persons for reoffering or resale, directly or indirectly, in Korea or to any resident of Korea (as defined under the Foreign Exchange Transaction Act of Korea and its Enforcement Decree) except pursuant to an exemption from the registration requirements of the Securities and Exchange Act of Korea available thereunder and/or in compliance with applicable laws and regulations of Korea.

Switzerland

No Offer Shares will be publicly offered or distributed in Switzerland. Offer Shares shall be offered in Switzerland privately only to a select circle of investors without the use of any public means of information or advertisement. This Offering Circular does not constitute an offer prospectus within the meaning of Art. 652a of the Swiss Code of Obligations. It has not been filed with or approved by any Swiss regulatory authority or stock exchange. The Offer Shares are not registered in Switzerland or listed at any Swiss stock exchange. This Offering Circular may not be distributed or used in Switzerland without the Company’s prior written approval.

Taiwan

The Offer Shares have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorised to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the Offer Shares in Taiwan.

United Arab Emirates (excluding the Dubai International Financial Centre)

The Offering of Offer Shares has not been approved or licensed by the UAE Central Bank or any other relevant licensing authority in the United Arab Emirates, and does not constitute a public offer of securities in the United Arab Emirates in accordance with the Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or otherwise. Accordingly, the Offer Shares may not be offered to the public in the United Arab Emirates. The Offer Shares may be offered, and this Offering Circular may be issued, only to a limited number of investors in the United Arab Emirates who qualify as sophisticated investors under the relevant laws of the United Arab Emirates.

Each of the Company, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers represents and warrants that the Offer Shares will not be offered, sold, transferred or delivered to the public in the United Arab Emirates.

Page 191 ------20. PLAN OF DISTRIBUTION ------

Nothing contained in this Offering Circular is intended to constitute investment, legal, tax, accounting or other professional advice. This Offering Circular is for your information only and nothing in this Offering Circular is intended to endorse or recommend a particular course of action. You should consult with an appropriate professional for specific advice rendered on the basis of your situation.

United Kingdom

This Offering Circular does not constitute an offer document or an offer of transferable securities to the public in the United Kingdom (the “UK”) to which Section 85 of the Financial Services and Markets Act 2000 of the UK (as amended, the “FSMA”) applies, and should not be considered as a recommendation that any person should subscribe for or purchase any of the Shares. The Offer Shares have not been and will not be offered or sold to the public in the United Kingdom (within the meaning of Section s 85(1) and 102B of FSMA) save in circumstances where an exception applies under Section 86(1) of FSMA or otherwise, in respect of the requirement to make an approved prospectus available to the public.

This Offering Circular is not being distributed by, nor has it been approved for the purposes of Section 21 of FSMA by, a person authorised under the FSMA. This Offering Circular is being communicated only to (i) persons outside the UK; or (ii) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (as amended, the “FPO”); (iii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2)(a) to (d) of the FPO or (iv) other persons to whom it may lawfully be communicated under the FPO (together, “Relevant Persons”). The Offer Shares are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. No part of this Offering Circular should be published, reproduced, distributed or otherwise made available in whole or in part to any other person without the prior written consent of each of the Company, the Joint Global Coordinators and Joint Bookrunners and the Co-Lead Managers. Any investment or investment activity to which this Offering Circular relates is only available to and will only be engaged in with such persons and persons who do not fall within (i), (ii), (iii) or (iv) above should not rely on or act upon this communication.

United States

The Offer Shares have not been and will not be registered under the US Securities Act or under any applicable securities laws or regulations of any state of the United States and, subject to certain exceptions, may not be offered or sold within the United States except to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Accordingly, the Offer Shares are being offered and sold only (1) in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act and (2) outside the United States in offshore transactions in reliance on Regulation S.

In addition, until 40 days after the commencement of the Offering of the Offer Shares an offer or sale of Offer Shares within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the US Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the US Securities Act.

The Underwriting Agreement provides that the Underwriters may directly or through their respective United States broker-dealer affiliates arrange for the offer and resale of Offer Shares within the United States only to qualified institutional buyers in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the US Securities Act.

Page 192 ------21. TRANSFER RESTRICTIONS ------

Because the following restrictions will apply to the offering of the Offer Shares, purchasers are advised to consult their own legal counsel prior to making any offer, resale, pledge or transfer of the Shares.

The Offer Shares have not been registered under the US Securities Act and may not be offered or sold within the United States (as defined in Regulation S) except to (a) qualified institutional buyers in reliance on the exemption from the registration requirements of the US Securities Act provided by Rule 144A under the Securities Act and (b) persons in offshore transactions in reliance on Regulation S.

International Offering in the United States

Each purchaser of the Offer Shares in the United States in reliance on Rule 144A under the Securities Act or another exemption from the registration requirements of the US Securities Act, by accepting delivery of this Offering Circular, will be deemed to have represented and agreed as follows:

(1) it (a) is a QIB, (b) is aware that the seller of the Offer Shares may be relying on the exemption from the provisions of Section 5 of the US Securities Act provided by Rule 144A or another exemption under the US Securities Act, (c) is purchasing such Offer Shares for its own account or for the account of a QIB with respect to which it invests on a discretionary basis, and (d) is not an affiliate of the Company or otherwise acting on its behalf;

(2) it understands that the Offer Shares being offered have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States and may not be offered, resold, pledged or otherwise transferred except (a)(i) to a person whom it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB, in a transaction meeting the requirements of Rule 144A, (ii) outside the United States in an offshore transaction in accordance with Regulation S, (iii) pursuant to an exemption from registration under the US Securities Act provided by Rule 144 thereunder, if available, (iv) pursuant to another available exemption from the registration requirements of the US Securities Act or (v) pursuant to an effective registration statement under the US Securities Act and (b) in each case in accordance with all applicable laws of any state or other jurisdiction of the United States. It acknowledges that the Offer Shares (whether in physical, certificated form or uncertificated form) offered and sold in accordance with Rule 144A or another available exemption from, or in transactions not subject to, registration under the US Securities Act, are “restricted securities” within the meaning of Rule 144(a)(3) under the US Securities Act. No representation is made as to the availability of the exemption provided by Rule 144 under the US Securities Act for resales of the Offer Shares;

(3) the Offer Shares sold in the Offering will constitute “restricted securities” within the meaning of Rule 144 under the US Securities Act, and for so long as they remain “restricted securities,” such Offer Shares may not be transferred except as described in clause (2) above;

(4) it will not deposit the Offer Shares, or cause the Offer Shares to be deposited, into any unrestricted depositary receipt facility established or maintained by a depositary bank relating to such shares, unless or until the Offer Shares are no longer deemed “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act;

(5) any offer, sale, pledge or other transfer made other than in compliance with the above stated restrictions shall not be recognised by us in respect of the Offer Shares;

(6) it agrees to notify and will be deemed to have notified, and each subsequent holder is required to notify and will be deemed to have notified, any purchaser of the Offer Shares from it or such subsequent holder of the resale restrictions referred to in clause (2) above, if then applicable; and

(7) it understands that the Offer Shares sold within the United States (to the extent they are in certificated form), unless the Company determines otherwise in accordance with applicable law, will bear a legend to the following effect: “THESE SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933 (THE “US SECURITIES ACT”) OR WITH ANY

Page 193 ------21. TRANSFER RESTRICTIONS ------

SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE US SECURITIES ACT TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE US SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE US SECURITIES ACT FOR RESALES OF THESE SHARES. NOTWITHSTANDING ANYTHING TO THE COMPANY IN THE FOREGOING, THE SHARES MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY IN RESPECT OF THE SHARES ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK.”

International Offering Outside the United States

Each purchaser of the Offer Shares outside the United States in reliance on Regulation S, by accepting delivery of this Offering Circular, hereby will be deemed to have represented and agreed as follows:

(1) It, and the person, if any, for whose account it is acquiring Offer Shares, are purchasing such Shares outside the United States in an offshore transaction in accordance with Regulation S; and

(2) It understands that the Offer Shares being offered have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States and it will not offer, sell, pledge or otherwise transfer such Shares other than in accordance with any applicable laws of any state or territory of the United States and any foreign jurisdiction; and

(3) any offer, sale, pledge or other transfer made other than in compliance with the above-stated restrictions will not be recognised by the Company in respect of the Offer Shares.

GENERAL

Each purchaser of the Offer Shares will be deemed to have represented and agreed that it is relying on this Offering Circular and not on any other information or representation concerning the Company or the Shares and neither the Company nor any other person responsible for this Offering Circular or any part of it, nor the Underwriters, will have any liability for any such other information or representation.

Page 194 ------22. TAXATION ------

The following summary is based on tax laws of the Republic of Indonesia and the United States as in effect as of the date of this Offering Circular, and is subject to changes in the laws of the United States or Indonesia, including changes that could have retroactive effect. The following summary does not take into account or discuss the tax laws of any countries other than the United States and Indonesia. Prospective purchasers in all jurisdictions are advised to consult their own tax advisers as to the tax consequences in the United States, Indonesian or other tax consequence of the purchase, ownership and disposition of the Shares.

INDONESIAN TAXATION

The following is a summary of the principal Indonesian tax consequences of the ownership and disposition of the Shares for a non-resident individual or non-resident entity (a “Non-Indonesian Holder”) holding the shares of an Indonesian company. As used in the preceding sentence, a “Non-Resident Individual” is a foreign national who does not reside in Indonesia or is not physically present in Indonesia for more than 183 days during any twelve month period, during which period such non-resident individual receives income in respect of the ownership or disposition of Shares. A “Non-Resident Entity” is a corporation or non corporate body that is established under the laws of a jurisdiction other than Indonesia, is not domiciled in Indonesia and does not have a fixed place of business or permanent establishment in Indonesia during an Indonesian tax year in which such non-Indonesian entity receives income in respect of the ownership or disposition of Shares.

Taxation of Dividends for a “Non-Indonesian Holder”

The dividends declared by the Company out of retained earnings and distributed to a Non-Indonesian Holder in respect of Shares are subject to Indonesian withholding tax, currently at the rate of 20%, on the amount of the distribution (in the case of cash dividends) or on the Shareholders’ proportional Shares of the value of the distribution (normally par value in the case of stock dividends). A lower rate provided under the DTAA may be applicable provided that, among others, the recipient is the beneficial owner of the dividend and is a resident of a treaty country. The recipient will have to submit to the Company the original copy of its Certificate of Domicile (“COD”) (COD / DGT-1 form / DGT-2 form). This COD is only valid for one year from the date of issuance and must be renewed subsequently. This rule also applies to the banks using the DGT-2 form. Page 2 of the DGT-1 form should be filled out and signed by the recipient for every dividend distribution.

Tax Treaties

Indonesia has concluded a DTAA with a number of countries including Australia, Belgium, Canada, France, Germany, Japan, Luxembourg, the Netherlands, Singapore, Sweden, Switzerland, the United Kingdom and the United States. Under the US-Indonesia DTAA, the withholding tax on dividends is reduced to 15% or reduced to 10% provided that the share ownership of the company paying the dividend is at least 25%.

Taxation of Dividends for an “Indonesian Holder”

Under the Indonesian Income Tax Law, the dividends declared by the Company out of retained earnings and distributed to an Individual Indonesian Holder in respect of the Shares are subject to final withholding tax at the rate of 10%. Dividends distributed to a Corporate Indonesian Holder are subject to non-final withholding tax at the rate of 15% which could be treated as a tax credit by the recipient. However, the dividend distributed to a Corporate Indonesian Holder that has share ownership of at least 25% in the company paying the dividend is not subject to tax.

Taxation on the disposition of shares

Under Government regulation No. 41 of 1994 regarding Withholding Tax on Income from Share Trading Transactions on the Stock Exchange dated 23 December 1994 which was last amended by Government Regulation No. 14 of 1997 dated 29 May 1997, the sale or transfer of shares that are listed on an Indonesian stock exchange is subject to final withholding tax of 0.1% of the gross amount of the transaction value and should be withheld by the broker handling the transaction. An additional 0.5% final tax (totalling a total tax of 0.6%) is imposed on the share value for the holding of the founder shares (except for the founder shares of a mutual fund). The imposition of 0.5% withholding tax will occur at the time of the initial public offering for shares traded on

Page 195 ------22. TAXATION ------the stock exchange on or after 1 January 1997. The imposition of 0.5% withholding tax on the founder shares is not compulsory. The tax regulations provide an option for the taxpayer to elect to substitute the 0.5% additional final tax with the taxation of actual capital gains (if any) resulting from the sale of the founder shares subject to the normal tax rates (a flat rate of 25.0% for corporate taxpayers or progressive rates with a maximum of 30.0% for individual taxpayers). Currently, the tax regulations concerning listed shares do not contain any provision in respect of DTAA provisions for a “Non-Indonesian Holder”. In practice, the 0.1% final withholding tax is applied irrespective of the fact that there may be DTAA exemptions. Indonesian tax authorities have a general rule regarding refunds, which may be used in case of an applicable DTAA exemption.

Stamp Duty

Based on Government Regulation No. 24 of 2000, a document that effects a sale of Indonesian Shares is subject to stamp duty. Currently, the nominal amount of the Indonesian stamp duty is Rp6,000 for transactions having a value greater than Rpl,000,000 and Rp3,000 for transactions having a value of up to Rpl,000,000. Generally, the stamp duty is due at the time the document is executed.

CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a general summary based on present law of certain US federal income tax consequences of the acquisition, ownership and disposition of Shares. The discussion is not a complete description of all tax considerations that may be relevant. It applies only to US Holders (as defined below) that acquire Shares in the Offering, hold Shares as capital assets and use the US dollar as their functional currency. The discussion is a general summary; it is not a substitute for tax advice. It does not address the tax treatment of investors subject to special rules, such as banks or other financial institutions, tax-exempt entities, insurance companies, dealers, traders in securities that elect to mark-to-market, investors liable for alternative minimum tax, US expatriates, investors that directly, indirectly or constructively own 10% or more of the Company’s voting stock, investors that are resident or ordinarily resident or have a permanent establishment outside the US or investors that hold Shares as part of a straddle, hedging, conversion or other integrated transaction. It also does not address US state and local tax considerations.

THE STATEMENTS ABOUT US FEDERAL TAX CONSIDERATIONS ARE MADE TO SUPPORT THE MARKETING OF THE SHARES. NO INVESTOR CAN RELY ON THEM TO AVOID TAX PENALTIES. EACH PROSPECTIVE INVESTOR SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISOR ABOUT THE TAX CONSEQUENCES UNDER ITS OWN PARTICULAR CIRCUMSTANCES OF INVESTING IN THE SHARES UNDER THE LAWS OF INDONESIA, MALAYSIA, THE UNITED STATES AND ITS CONSTITUENT JURISDICTIONS AND ANY OTHER JURISDICTIONS WHERE THE PURCHASER MAY BE SUBJECT TO TAXATION.

As used here, a “US Holder” means a beneficial owner of the Company’s Shares that is for US federal income tax purposes (i) a citizen or individual resident of the United States, (ii) a corporation or other business entity treated as a corporation created or organised under the laws of the United States or its political subdivisions, (iii) a trust subject to the control of one or more US persons and the primary supervision of a US court and (iv) an estate the income of which is subject to US federal income tax without regard to its source.

The US federal income tax treatment of a partner in a partnership that holds Shares will depend on the status of the partner and the activities of the partnership. Partnerships should consult their tax advisors concerning the US federal income tax consequences to their partners of the acquisition, ownership and disposition of Shares.

Page 196 ------22. TAXATION ------

Dividends

Subject to the discussion below under “– Passive Foreign Investment Company Rules,” the gross amount of any distribution of cash or property (other than certain distributions, if any, of our Shares distributed pro rata to all our shareholders), with respect to the Shares, before reduction for any Indonesian taxes withheld therefrom, will be included in a US Holder’s income as dividend income to the extent such distributions are paid out of the Company’s current or accumulated earnings and profits as determined under US federal income tax principles. Subject to the discussion below under “– Passive Foreign Investment Company Rules,” to the extent that the amount of any distribution by the Company exceeds its current and accumulated earnings and profits as determined under US federal income tax principles, it will be treated first as a tax-free return of the adjusted tax basis in the Shares and thereafter as capital gain. The Company does not maintain calculations of its earnings and profits under US federal income tax principles. Accordingly, US Holders should assume that any distribution made by the Company (other than, as discussed above, a distribution of shares) will be treated as a dividend for US federal income tax purposes.

The dividends will not be eligible for the dividends-received deduction available to US corporations. Dividends received by eligible non-corporate US Holders, however, should be taxed at the preferential rate applicable to qualified dividend income if (i) the Company qualifies for the benefits of the income tax treaty between the United States and Indonesia, which the Company believes it does, (ii) the Company is not a PFIC in the year of distribution or the preceding year and (iii) the holder has held the Shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date.

Dividends paid in foreign currency will be included in income in a US dollar amount based on the exchange rate in effect on the date of receipt of the dividend, whether or not the currency is converted into US dollars at that time. A US Holder’s tax basis in the foreign currency will equal the US dollar amount included in income. Any gain or loss on a subsequent conversion or other disposition of the foreign currency for a different US dollar amount will be US source ordinary income or loss. If dividends received in foreign currency are converted into US dollars on the day they are received, the US Holder generally will not be required to recognise foreign currency gain or loss in respect of the dividend income.

Distributions on Shares will generally be dividend income from foreign sources. As discussed in “Indonesian Taxation” above, under current law, payments of dividends by the Company to foreign investors are generally subject to an Indonesian withholding tax, subject to certain exceptions. A US Holder will be entitled, subject to a number of complex limitations and conditions (including a minimum holding period requirement), to claim a US foreign tax credit or deduction in respect of any Indonesian income taxes withheld on dividends received on the Shares. However, a US Holder will not be entitled to claim a US foreign tax credit for the Indonesian withholding taxes in excess of the rates available under the US-Indonesia DTAA. Dividends received with respect to the Shares generally will be treated as foreign source income. For purposes of the US foreign tax credit limitation, dividends received with respect to the Shares should generally constitute “passive category income.” The rules governing foreign tax credits or deductions are complex and you are urged to consult your tax advisors regarding the availability of foreign tax credits or deductions under your particular circumstances.

Dividends received by certain non-corporate US Holders will generally be includible in “net investment income” for purposes of the Medicare contribution tax.

Dispositions

A US Holder generally will recognise capital gain or loss on the sale or other disposition of Shares equal to the difference between the US dollar value of the amount realised and the US Holder’s tax basis in the Shares. The US Holder’s amount realized will include the gross amount of the proceeds from the sale or other disposition before deduction of any Indonesian tax. See “– Indonesian Taxation” for a description of when a disposition may be subject to taxation by Indonesia. Any gain or loss generally will be treated as arising from US sources. The gain or loss will be long-term capital gain or loss if the US Holder’s holding period exceeds one year. Deductions for capital loss are subject to significant limitations.

The initial tax basis of the US Holder’s Shares will be the US dollar value of the foreign currency denominated purchase price determined on the date of purchase. If the Shares are treated as traded on an “established

Page 197 ------22. TAXATION ------securities market,” a cash basis US Holder (or, if it elects, an accrual basis US Holder) will determine the US dollar value of the cost of such Shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase.

A US Holder that receives foreign currency on the sale or other disposition of the Shares will realise an amount equal to the US dollar value of the foreign currency on the date of sale or other disposition (or in the case of Shares traded on an “established securities market” that are sold by a cash basis or electing accrual basis taxpayer, the settlement date). A US Holder will recognise currency gain or loss if the US dollar value of the currency received at the spot rate on the settlement date differs from the amount realised. A US Holder will have a tax basis in the foreign currency received equal to its value at the spot rate on the settlement date. Any currency gain or loss realised on the settlement date or on a subsequent conversion of the foreign currency into US dollars will be US source ordinary income or loss. US Holders generally will not be entitled to a credit with respect to an Indonesian withholding tax, if any, on the sale or transfer of Shares that are listed on an Indonesian stock exchange (the “Indonesian Transfer Tax”) (as discussed in “– Indonesian Taxation”). However, US Holders should be entitled to reduce the amount realized on the sale or other disposition in such Shares for the amount of the Indonesian Transfer Tax.

Capital gains from the sale or other disposition of the Shares received by certain non-corporate US Holders will generally be includible in “net investment income” for purposes of the Medicare contribution tax.

Passive Foreign Investment Company Rules

In general, a non-US corporation will be a PFIC for any taxable year in which (1) 75% or more of its gross income consists of passive income, or (2) 50% or more of the average quarterly value of its assets (which may be determined in part by the market value of the Shares, which is subject to change) consists of assets that produce, or are held for the production of, passive income. For this purpose, passive income generally includes, among other things, dividends, rents, royalties and gains from the disposition of investment assets (subject to various exceptions).

Based upon the composition of the Company’s gross income and gross assets and the nature of the Company’s business, the Company does not believe that it was classified as a PFIC for US federal income tax purposes for the taxable year ending 31 December 2012. The Company’s status in 2013 and future years will depend on the Company’s assets and activities in those years. The Company has no reason to believe that its assets or activities will change in a manner that would cause it to be classified as a PFIC, but there can be no assurance that it will not be considered a PFIC for any taxable year.

If the Company were a PFIC for any taxable year during which a US Holder held the Shares, gain recognised by a US Holder on a sale or other taxable disposition (including certain pledges) of the Shares would generally be allocated ratably over the US Holder’s holding period for the Shares. The amounts allocated to the taxable year of the sale or other taxable disposition and to any year before the Company became a PFIC would be taxed as ordinary income.

The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations for that year, as appropriate, and an interest charge would be imposed. Further, to the extent that any distribution received by a US Holder on its Shares exceeds 125 percent of the average of the annual distributions on the Shares received during the preceding three years or the US Holder’s holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain, as described immediately above. Certain elections may be available that would result in alternative treatments (such as mark- to-market treatment) of the Shares. US Holders are encouraged to consult their own tax advisers to determine whether any of these elections would be available and, if so, what the consequences of the alternative treatments would be in their particular circumstances.

Information Reporting and Backup Withholding

Dividends on Shares and proceeds from the sale or other disposition of Shares may be reported to the US Internal Revenue Service unless the holder establishes a basis for exemption. Backup withholding tax may apply to

Page 198 ------22. TAXATION ------amounts subject to reporting. Any amount withheld may be credited against the holder’s US federal income tax liability subject to certain rules and limitations. Prospective holders are urged to consult with their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Certain non-corporate US Holders are required to report information with respect to investments in Shares not held through an account with a domestic financial institution. US Holders that fail to report required information could become subject to substantial penalties. Potential investors are encouraged to consult with their own tax advisors about these and any other reporting obligations arising from their investment in Shares.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.

Page 199 ------23. LEGAL MATTERS ------

Certain legal matters in connection with the Offering will be passed upon:

Š for the Selling Shareholders by Freshfields Bruckhaus Deringer with respect to matters of English law and United States federal laws, for ACC by Makes & Partners Law Firm with respect to matters of Indonesian law, for Multipolar by Nindyo & Associates with respect to matters of Indonesian law, and for the Selling Shareholders by Maples and Calder with respect to matters of Cayman law;

Š for the Company by Freshfields Bruckhaus Deringer with respect to matters of English law and United States federal laws, by Hiswara, Bunjamin & Tandjung with respect to matters of Indonesian law, by Adnan Sundra & Low with respect to matters of Malaysian law, and by Maples and Calder with respect to matters of Cayman law; and

Š for the Joint Global Coordinators and Joint Bookrunners by White & Case Pte. Ltd. with respect to matters of English law and United States federal laws, and by Hadiputranto, Hadinoto & Partners with respect to matters of Indonesian law.

In rendering their opinions, each of Freshfields Bruckhaus Deringer and White & Case Pte. Ltd. may rely upon the opinions of Makes & Partners Law Firm, Nindyo & Associates, Hiswara, Bunjamin & Tandjung and Hadiputranto, Hadinoto & Partners, respectively, as to all matters of Indonesian law, and the opinions of Maples and Calder as to matters of Cayman law.

Page 200 ------24. INDEPENDENT PUBLIC ACCOUNTANTS ------

The Company’s financial statements as at and for the years ended 31 December 2010, 2011 and 2012 included in this Offering Circular have been audited by KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network), independent public accountants, as stated in their report appearing herein.

Page 201 ------25. KEY FEATURES OF THE SHARES ------

SHARE CAPITAL INFORMATION

The Company’s authorised share capital is 3,911,120,640 Shares consisting of 6,168,960 type A Shares, 259,096,320 type B Shares and 3,645,855,360 type C Shares. The Company’s issued share capital is 2,917,918,080 Shares consisting of 6,168,960 type A Shares with a nominal value of Rp5,000 per Share, 259,096,320 type B Shares with a nominal value of Rp350 per Share, and 2,652,652,800 type C Shares with a nominal value of Rp100 per Share.

When Shares are traded settlement can take place in any type of Share or in a combination of types. Settlement of Shares in the Offering will be of any type and/or a combination of types.

The following is a summary of material rights and restrictions related to the Shares under applicable provisions of Indonesian law and the provisions of the Company’s Articles of Association. This description does not purport to be complete.

All of the Shares are registered and issued in the name of the owners listed in the Company’s register of Shareholders (the “Register of Shareholders”). In the process of becoming a publicly listed company, the Board of Directors appointed PT Sharestar Indonesia, a stock administration bureau (the “Share Registrar”), to keep and maintain the Register of Shareholders. To enable it to perform this role, the Share Registrar receives a list of Shareholders from KSEI with respect to the scripless Shares that are administered by KSEI. The Company must treat the person whose name is entered in the Register of Shareholders as the lawful shareholder entitled to exercise any rights conferred by the articles or by law upon such Shares.

All transfers of the Shares must be evidenced by an instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee or based on other documents which give satisfactory evidence of such transfer in the opinion of the Board of Directors. In addition, any transfer of the Shares must comply with applicable laws, including rules and regulations applicable in the Indonesian capital market and rules of the IDX. Transfers of Shares will only take effect after the transfer is registered in the Register of Shareholders. The transferor of any Shares will be treated as the owner of those Shares until the transferee’s name has been recorded in the Register of Shareholders with due observance of the applicable laws or with respect to scripless Shares, registered in the list of Shareholders maintained by KSEI. Under the scripless system, KSEI will be registered as the holder of the Shares in the Register of Shareholders, in its capacity as the central securities depositary institution which holds the Shares on behalf of KSEI participants which in turn hold the Shares on behalf of the investors (the “Beneficial Shareholders”).

The Shareholders whose names are recorded in the Register of Shareholders (“Registered Shareholders”) are entitled to pre-emptive rights in the event the Company issues new Shares, convertible bonds, warrants or other securities convertible into Shares, in proportion to their Shares ownership except as provided below. For Shares deposited with KSEI, all ownership rights are automatically distributed by KSEI, through KSEI participants, to investors ultimately holding the Shares as Beneficial Shareholders (or their assignees). Such pre-emptive rights may be sold and transferred to third parties without the consent of any party, to the extent permitted by the rules and regulations applicable in the Indonesian capital market and rules of the IDX. If the Registered Shareholders or the Beneficial Shareholders (or their respective assignees) do not exercise their pre-emptive rights within a period of time determined by the Board of Directors (in accordance with the prevailing regulations), the Board of Directors may issue such Shares, convertible bonds, warrants or other securities to third parties on the same terms and conditions.

In accordance with BAPEPAM-LK Regulation No. IX.D.4 and the Company’s Articles of Association and the prevailing regulations in capital markets, the Company may increase its share capital without providing the

Page 202 ------25. KEY FEATURES OF THE SHARES ------

Registered Shareholders a pre-emptive right or the Beneficial Shareholders the right to subscribe for securities provided that, such action complies with BAPEPAM-LK Regulation No.IX.D.4 and is subject to the following provisions:

(1) within any two year period, the increase in the Company’s authorised share capital without pre-emptive rights is no more than 10% of the paid-in capital; or

(2) the main objective of the increase in the Company’s authorised share capital is to improve its financial position which is experiencing one of the following conditions:

(i) the Company has negative net working capital and has liabilities of more than 80% of its assets at the time of the general meeting of shareholders approving the capital increase; or

(ii) the Company has defaulted or is not capable of meeting its payment obligations with a non- affiliated lender, and the non-affiliated lender agrees to receive the Company’s Shares or convertible bonds to settle the loan.

Other than as described above, the Company’s authorised share capital may be increased or decreased by a shareholder’s resolution passed at a general meeting. The Company’s Articles of Association will be amended to reflect such a change. This amendment will only be effective only after obtaining approval from the Minister of Law and Human Rights. In the case of a decrease in the Company’s authorised and issued share capital, the approval from the Minister of Law and Human Rights may only be given if (i) such decrease has been approved at a general meeting of Shareholders in accordance with applicable law and the result of which should be announced in, at least, one (1) Indonesian daily newspaper with nationwide circulation, at the latest two working days following such general meeting of Shareholders resolution; (ii) there are no objections from the Company’s creditors within 60 day period after the date of the newspaper announcement with respect to the general meeting of Shareholders resolution mentioned in point (i); (iii) a settlement has been reached on any objection raised; and (iv) any creditors’ lawsuit as the result of objections by creditors has obtained a final and binding judgment rendered by the court.

There are no differences in the rights afforded to holders of type A, type B and type C Shares.

SHAREHOLDERS’ MEETING AND VOTING RIGHTS

Each Share entitles the owner thereof to cast one vote in a general meeting of Shareholders. There are two types of general meeting of Shareholders: (i) annual general meeting of Shareholders and (ii) extraordinary general meeting of Shareholders.

In the case of Shares held by KSEI, prior to the Company taking corporate action, KSEI must provide details to the Company concerning the Share entitlements of all the Beneficial Shareholders on whose behalf Shares are held. A KSEI participant holding Shares on behalf of a Beneficial Shareholder is obliged to notify such Beneficial Shareholder of the exercise of any pre-emptive rights and deliver offering circulars and other notices issued by the Company as well as notices of general meetings of Shareholders. Beneficial Shareholders or their legally authorised representatives have the right to be present and vote at the Company’s general meetings of Shareholders. See Section 26 – “Indonesian Capital Markets”.

The Company’s annual general meeting of Shareholders must be held by no later than six months after the close of the Company’s financial year each year. At such annual general meeting, the Board of Directors must (i) submit the report on the Company’s affairs and management on the previous financial year, which has been examined by the Board of Commissioners, for approval; and (ii) submit the audited financial statements for the previous financial year, for ratification by the Shareholders. All materials associated with the matters described above must be made available in the office for inspection by any shareholder from the day such shareholder is notified of the annual general meeting through the date of the annual general meeting. Any additional proposals for the annual general meeting agenda duly submitted in writing by one or more Shareholders owning an aggregate of at least 10% of the Company’s total subscribed Shares must be included in the agenda of such meeting, provided that such proposals are received by the Board of Directors at least seven days prior to the

Page 203 ------25. KEY FEATURES OF THE SHARES ------meeting invitation and if, in the Board of Directors’ opinion, the proposal is deemed directly related to the Company’s business activities and with due observance of the provisions of the Company’s Articles of Association. In the event neither the Board of Directors nor the Board of Commissioners provide notice of an annual general meeting of Shareholders within the prescribed time, one or more Shareholders owning an aggregate of at least 10% of the Company’s subscribed Shares may call a meeting at the Company’s expense after obtaining approval from the District Court of the Company’s legal domicile.

Either the Board of Directors or the Board of Commissioners may also convene an extraordinary general meeting of Shareholders upon receipt of written notice requesting a meeting from one or more Shareholders owning an aggregate of at least 10% of the total subscribed Shares, provided that such proposals are received by the Board of Directors at least seven days prior to such meeting and if, in the Board of Directors’ opinion, the proposal is deemed directly related to the Company’s business activities and with due observance of the provisions of the Company’s Articles of Association. The written request thereof shall be completed with the consideration of convening such meeting and the proposed agenda.

At least 14 days prior to the issuance of notice of both extraordinary general meetings and annual general meetings of Shareholders (excluding the date of the notice and the date of the announcement), an announcement that a Shareholders’ meeting is to be called must be advertised in at least one Indonesian newspaper with a national circulation and in one Indonesian daily newspaper with municipal circulation.

Subsequently, a notice of both extraordinary general meetings and annual general meetings of Shareholders must be advertised in at least one Indonesian daily newspaper with a national circulation and in one Indonesian daily newspaper with municipal circulation, both published in Indonesia at least 14 days before the meeting (excluding the date of the noticing and date of the meeting).

The quorum for an annual general meeting of Shareholders requires Shareholders and/or authorised proxies representing more than 50% of the issued Shares with voting rights to be represented either in person or by a power of attorney at such meeting. The quorum requirement for an extraordinary general meeting of Shareholders may be greater, depending on the nature of the resolutions to be passed at such meeting.

Shareholders may be represented in a general meeting of Shareholders by any person holding a power of attorney, provided that if the proxy is a Commissioner, Director or employee of ours then the vote of any such proxy shall not be counted. In order to be adopted, resolutions must be resolved in amicable consensus, failing which, the resolutions shall be resolved having obtained the affirmative votes of Shareholders holding more than 50% of the Shares which are either present or represented in the meeting, except for resolutions concerning certain transactions such as (i) the transfer or disposal of rights of the net assets of the Company within one financial year or more or the encumbrance of all or a majority of the Company’s total assets, (ii) amendments to the Company’s Articles of Association, or (iii) a merger, consolidation, acquisition or spin-off; the resolutions quorum are varied in accordance with certain provisions in the Company’s Articles of Association.

DIVIDENDS

A portion or all of the Company’s net profit at the closing of the relevant financial year, as determined during an annual general meeting of Shareholders, net of any accumulated losses from the previous financial years and after deduction of mandatory reserve funds, may be used as dividends. Dividends, if any, are paid in accordance with a resolution adopted at an annual general meeting of Shareholders, which resolution must establish the amount, the time and manner of payment of the dividends. All Shares which are fully paid and outstanding at the time a dividend is declared are entitled to shares equally in such dividend. Dividends are payable to the persons whose names are recorded in the Register of Shareholders. Under Company Law and the Company’s Articles of Association dividends unclaimed after a period of five years will be placed in a special reserve fund, however Shareholders may still exercise their rights to collect their dividends from the special reserve fund in compliance with the applicable procedures, as determined by the general meeting of Shareholders. Dividends which have been placed in a special reserve fund and which have not been collected by Shareholders within a 10-year period shall become the property of the Company.

Page 204 ------25. KEY FEATURES OF THE SHARES ------

A mandatory reserve fund, up to an amount of at least 20% of the subscribed capital, shall be appropriated to cover the Company’s future losses. Amounts in the reserve fund that exceed 20% of the subscribed capital may be used for working capital or other purposes in the Company’s interest, subject to the approval of the Shareholders at a general meeting. Any interest or other profit earned from such reserve fund must be entered in the Company’s profit and loss account.

See Section 6 – “Dividend Policy” for more information.

AMENDMENTS TO THE ARTICLES OF ASSOCIATION

The Company’s Articles of Association may only be amended under a resolution determined at a general meeting of Shareholders attended by Shareholders, or their lawful proxies, representing at least two-thirds of the total number of Shares outstanding and approved by at least two-thirds of the votes cast with respect thereto. Under the Company Law and BAPEPAM-LK Regulation No. IX.J.1 attached to the decision of BAPEPAM-LK No. Kep-179/BL/2008 on Main Provisions of Articles of Association of Companies conducting Public Offering and Public Companies dated 14 May 2008, any amendment to the Articles of Association pertaining to (i) the name and/or domicile of the Company; (ii) the objectives and purpose of the Company; (iii) term of establishment of the Company; (iv) an increase or reduction of the authorised capital of the Company; (v) a reduction in the subscribed capital; or (vi) a change in the status of the Company (private company becoming public company and vice versa) will only be effective upon approval by the Minister of Law and Human Rights. Notice of other amendments must be delivered to the Minister of Law and Human Rights and will be effective as at the date of the letter from the Minister of Law and Human Rights confirming acceptance of the notice, except for any amendment that would increase the issued capital which will be effective when paid-up. If a quorum is not obtained at a general meeting convened for such purpose, then no earlier than ten days and no later than 21 days after such original general meeting, a second meeting may be held to render a legal and binding resolution on matters which were not resolved at the previous meeting. The second meeting must be attended by Shareholders representing at least three-fifths of the total issued Shares, and resolutions adopted at such a meeting must be approved by at least more than a half of the total votes present and cast at the meeting. Upon failure of having the required quorum in the second meeting, the Company may ask the OJK to determine the quorum and notice requirement for convening the third meeting.

LIQUIDATION

A resolution for the Company’s dissolution must be approved at a general meeting of Shareholders attended by Shareholders or their lawful proxies representing at least three fourths of the total number of Shares outstanding and approved by at least three fourths of the total votes cast at the meeting. Under the Company Law and the Articles of Association, if a quorum is not obtained at a general meeting convened for such purpose, then no earlier than ten days and no later than 21 days after such extraordinary general meeting, a second meeting may be held to render a legal and binding resolution on matters which were not resolved at the previous meeting. The second meeting must be attended by Shareholders representing at least two thirds of the total issued Shares, and resolutions adopted at such a meeting must be approved by at least three fourths of the total votes present and cast at the meeting. Upon failure of having the quorum required in the second meeting, the Company may ask OJK to determine the quorum and notice requirement for convening a third meeting.

If the Company is wound up, dissolved or declared bankrupt, subject to insolvency or for any other reason provided under the Company Law, the general meeting of Shareholders must appoint a liquidator to perform certain liquidation procedures. If the general meeting of Shareholders fails to appoint a liquidator, the Board of Directors shall act as liquidator.

The liquidators, within 30 days of the shareholders resolution or court decision for the Company’s dissolution, shall notify the creditors by publishing in the State Gazette and advertising in two Indonesian daily newspapers published in Indonesia, as determined by the Board of Directors, and notify the same to the Minister of Law and Human Rights and OJK, with due observance to the prevailing laws and regulations of IDX.

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RIGHTS OF SHAREHOLDERS

In general, Indonesian law has historically afforded shareholders fewer rights than those available in common law jurisdictions such as the United States and the United Kingdom. See Section 4 – “Risk Factors – Risks Relating to an Investment in the Shares – You may be subject to limitations on minority shareholders’ rights.” The Company Law affords certain rights to Shareholders, and certain additional rights to one or more Shareholders collectively representing at least 10% of the total issued and paid up share capital of the Company (“Minority Shareholders”).

A Shareholder generally has the right to lodge a legal action against the Company if harmed by any unfair and unreasonable action the Company has taken. In addition, each Shareholder has the right to request the Company to repurchase the Shareholder’s shares at the then prevailing market price if such Shareholder believes certain of the Company’s actions would harm the interests of such Shareholder or the Company. These actions include the amendment of the Articles of Association, transfer or sale or encumbrance of more than 50% of the Company’s net assets in one (1) or more transactions, or the Company’s merger, consolidation, acquisition or spin-off. Under the Company Law, the Company may repurchase Shares, provided that such repurchase (i) must not cause the Company’s net assets (as stated in the Company’s most recent balance sheet, as approved by the Shareholders within the last six months) to fall below paid-in capital and reserves; (ii) may not cause the total number of Shares having been repurchased by the Company and pledge or other encumbrance of Shares held by the Company or by another company which shares directly/indirectly owned by the Company, to become more than 10% of the Company’s outstanding Shares; and (iii) in compliance with the procedure and the requirement under the Indonesian Capital Market Law, in particular BAPEPAM-LK Regulation No.XI.B.2 attached to the decision of BAPEPAM-LK No. KEP-105/BL/2010 on Share Buy Back by the Issuer or Public Company dated 13 April 2010. To the extent that a request to repurchase shares exceeds these limitations, the Company is required to seek a third-party purchaser for such Shares. Under Article 40 of the Company Law, Shares repurchased by the Company are not allowed to be used to cast a vote in a general meeting of Shareholders, and will not be counted in determining the quorum that has to be achieved in accordance with the Company Law and the Company’s Articles of Association.

The Company’s Minority Shareholders have certain other rights. These include the right to call a general meeting of Shareholders if the Directors or Commissioners fail to convene such meeting within the stipulated time. Minority Shareholders also have the right to lodge a derivative action on the Company’s behalf against the Company’s Directors or Commissioners who, through error or negligence, have caused the Company losses. Under the Company Law, Directors and Commissioners are obliged to act in good faith, with full responsibility and in the best interests of the Company when carrying out their corporate duties. The Company’s Minority Shareholders may request that the Company be examined by a court-appointed third party if there is suspicion that the Company or any of the Company’s Directors or Commissioners have committed an act contrary to law. Minority Shareholders may also apply to a court for the Company’s dissolution.

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The following information has been derived from publicly available information and the Company, the Selling Shareholders, and the Financial Adviser, the Joint Global Coordinator, Joint Bookrunners and the Co-Lead Managers have not independently verified the information contained in this section.

BACKGROUND AND DEVELOPMENT

In 1976, the Government established the Capital Market Executive Agency (Badan Pelaksana Pasar Modal)or Bapepam, the Capital Market Development Agency (Badan Pembina Pasar Modal) and a national investment fund Company, PT Danareksa, to reactivate and promote the development of a securities market in Indonesia. In 1990, the Capital Market Executive Agency and the Capital Market Development Agency became the Capital Market Supervisory Board (Badan Pengawas Pasar Modal). The listing of the first shares on the Jakarta Stock Exchange (the “JSX”) took place in August 1977. Up until the end of 1988, the shares of only 24 companies were listed on the JSX and the volume of shares traded was relatively low.

On 16 April 1992, the operation of the JSX was transferred from Bapepam to PT Bursa Efek Jakarta with the principal goal of ensuring the orderly and fair operation of the securities exchanges. Over the next twelve years a number of reform measures affecting the Indonesian Capital Markets were announced. This led to the privatisation of the JSX, or PT Bursa Efek Jakarta, and its establishment as a limited liability company consisting of 221 securities trading companies as initial shareholders.

In December 2005, the Capital Market Supervisory Board merged with the Financial Institution Supervisory Agency (Badan Pengawas Lembaga Keuangan) under the Department of Finance, and changed its name to the Capital Markets and Financial Institution Supervisory Board (Badan Pengawas Pasar Modal dan Lembaga Keuangan), referred to herein as BAPEPAM-LK.

The various reforms over the past few years have sought to strengthen the operational and supervisory framework of the Indonesian securities market and to improve the Indonesian securities market’s trading environment. The measures also established an over-the-counter market (called the “Bursa Paralel Indonesia”) and private stock exchanges outside Jakarta, the first of which was the Surabaya Stock Exchange (the “SSX”). The Bursa Paralel Indonesia was later merged with the SSX.

The JSX and the SSX were effectively merged on 30 November 2007, with the JSX as the surviving entity. As the result of the merger, the JSX is now operating under a new name, being PT Bursa Efek Indonesia (the “Indonesia Stock Exchange”or“IDX”).

Other reforms were also introduced to provide increased protection for minority shareholders, to improve disclosure requirements and clarify listing procedures. As of 31 December 2009, there were 398 firms listed on the IDX with a total market capitalisation of Rp2.0 trillion as compared to 24 listed companies with a capitalisation of approximately Rp100 billion in December 1987, just prior to the introduction of the capital market reform measures.

On 22 November 2011, the Government enacted Law No. 21 of 2011 concerning the Financial Services Authority (Otoritas Jasa Keuangan) to take over certain functions, tasks and authorities relating to the supervision and regulation of financial service activities in the banking sector from Bank Indonesia effective 31 December 2013, as well as the supervision and regulation of financial service activities in capital markets, insurance, pension funds, finance companies and other financial service institutions sectors from the BAPEPAM- LK effective 31 December 2012.

OVERVIEW OF THE IDX

As of 31 December 2012, the IDX had 459 members and its 20 most active members in total trading volume handled transactions for 488,977 million shares and approximately 46.4% of total shares traded on the IDX for the month ended 31 December 2012. The 20 most active members accounted for Rp169,651 billion in terms of trading value, or about 15.2% of the overall value of buying and selling transactions on the IDX for the month ended 31 December 2012.

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Trading rules on the IDX are at present generated in the form of decisions issued by the IDX. There are currently five daily trading sessions for the regular market, two daily trading sessions for the negotiated market, and one daily trading session for the cash market. The following table sets out the respective trading sessions:

Trading Session Market New trading hours Pre-opening ...... Regular Monday – Friday 08:45:00 – 08:59:59

1st session ...... Regular, Cash and Negotiated Monday – Thursday 09:00 – 12:00 Friday 09:00 – 11:30

2nd session ...... Regular Monday – Thursday 13:30:00 – 15:49:59 Friday 14:00:00 – 15:49.59

Pre-closing session ...... Regular 15:50:00 – 16:04:59

Post-closing session ...... Regular 16:05:00 – 16:15:00

2nd session ...... Negotiation Monday – Thursday 13:30:00 – 16:15:00 Friday 14:00:00 – 16:15:00

Trading is divided into three market segments: regular market, negotiated market and cash market (except for rights issues, which may only be traded in the cash market and in the morning session of the negotiated market). The regular market is the mechanism for trading stock in standard lots on a continuous auction market during exchange hours. Regular market trading is generally carried out in unit lots of 500 shares, except for bank shares which must trade in unit lots of 5,000. Price movements of traded securities are as follow:

Š for shares with a previous price of less than Rp200, in multiples of Rp1 and each price movement should be no more than Rp10;

Š for shares with a previous price between the range of Rp200 up to less than Rp500, in multiples of Rp5 and each price movement should be no more than Rp50;

Š for shares with a previous price between the range of Rp500 up to less than Rp2,000, in multiples of Rp10 and each price movement should be no more than Rp100;

Š for shares with a previous price between the range of Rp2,000 up to less than Rp5,000, in multiples of Rp25 and each price movement should be no more than Rp250; and

Š for shares with a previous price of Rp5,000 or more, in multiples of Rp50 and each price movement should be no more than Rp500.

Auctioning takes place according to price priority and time priority. Price priority gives priority to buying orders at a higher price or selling orders at a lower price. If buying or selling orders are placed at the same price, priority is given to the buying or selling order placed first in time (i.e. time priority).

Negotiated market trading is carried out by (i) direct negotiation between members of IDX, (ii) between clients through one member of IDX, or (iii) between a client and a member of IDX. Negotiated market trading does not use round lots.

Transactions on the IDX regular market are required to be settled no later than the third trading day after the transaction, except for cross trading. Transactions on the IDX negotiated market is settled based on agreement of

Page 208 ------26. INDONESIAN CAPITAL MARKETS ------the parties involved, or not later than the third trading day after the transaction if the parties have not agreed on the timing of settlement. Transactions on the IDX cash market are required to be settled on the trading day of the transaction. In case of a default by an exchange member on settlement, cash market trading takes place, under which trading of securities by means of direct negotiation on cash and carry terms will be conducted. All cash market transactions must be reported to the IDX. An exchange member defaulting in settlement may be given sanction by the IDX, among others, of (i) a fine up to Rp500,000,000; (ii) a written warning; and/or (iii) a temporary suspension of trading.

All transactions involving shares listed only on the IDX that use the services of brokers must be conducted on the IDX. In order for a trade to be made on the IDX, both the cash and securities settlement must be conducted through the facilities of the IDX. Furthermore, the IDX may cancel a transaction if proof exists of fraud, market manipulation or the use of insider information. The IDX may also suspend trading if there are indications of fraudulent transactions or artificial inflation of share prices, misleading information, use of insider information, counterfeit securities or securities blocked from trading or any other material event. The IDX may suspend trading of certain securities or suspend certain members of the stock exchange.

Members of the IDX charge a brokerage fee for their services, based on an agreement with their clients of up to a maximum of 1% of the transaction value. When conducting share transactions on the IDX, exchange members are required to pay a transaction levy equal to 0.018% of each transaction value (subject to a minimum fee of Rp20 million a month) for transaction of share and other registered securities, 0.009% of each transaction value for clearing fees and 0.003% of each transaction value for settlement fees. . Exchange members generally pass on the cost of this levy to their clients. Clients are also responsible for paying a 10% value-added tax on the amount of the brokerage fee and transaction levy. Indonesian sellers are also required to pay a withholding tax of 0.1% of the total transaction value. A stamp duty of Rp3,000 is also payable on any transaction with a value between Rp250,000 and Rp1,000,000 and a stamp duty of Rp6,000 is payable on every transaction with a value of more than Rp1,000,000. See Section 22 – “Taxation”.

Shareholders or their appointees may request, at any time during working hours, the issuer or a securities administration bureau appointed by the issuer to register their share in the issuer’s registry of Shareholders. Reporting of share ownership to OJK is mandatory for Shareholders and members of an issuer’s board of directors or board of commissioners, whose ownership has reached 5.0% or more of an issuer’s issued and fully paid-up capital, upon meeting such ownership threshold or upon a change of the level of one’s ownership of an issuer, and such reporting must occur at the latest within ten days of changes to such ownership.

The following table sets forth key figures for the IDX for the years 2010, 2011 and 2012: 2010 2011 2012 Market capitalisation (billion Rp) ...... 3,247,097 3,537,294 4,126,995 Total Trading Volume (million share) ...... 1,330,865 1,203,550 1,053,762 Average daily trading volume (million share) ...... 5,432 4,873 4,284 Total Trading value (billion Rp) ...... 1,176,237 1,223,441 1,116,113 Average daily trading value (billion Rp)...... 4,801 4,953 4,537 Number of listed companies ...... 420 440 459

Source: IDX Statistic 2012

IDX Auto Rejection Regulations

Based on Stock Exchange Trading Regulation No. II-A, Attachment to the Decree of the Board of Directors of PT Bursa Efek Indonesia No.Kep-00399/BEI/011-2012 dated 2 January 2013 (“IDX Reg.II-A”), the IDX securities trading system (“JATS”) will automatically reject a sale offer and/or purchase demand for equity type securities if:

Š the sale offer or purchase demand price is less than Rp50;

Š the sale offer or purchase demand price is:

O more than 35% below or above the Reference Price (as defined below) within the range from Rp50 to Rp200;

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O more than 25% below or above the Reference Price within the range from Rp200 to Rp5,000; or

O more than 20% below or above the Reference Price over Rp5,000; or

Š the volume of the sale offer or purchase demand is more than 10,000 lots or 5% out of the total number of the company’s shares listed on the IDX (whichever is smaller).

As applicable to MDS as a public listed company, “Reference Price” means (a) the opening price (harga pembukaan) in the regular market (the “Opening Price”), (b) the closing price (harga penutupan) on the previous trading day if the opening price is not available (the “Previous Price”), or (c) the theoretical price as a result of a corporate action (harga teoritis hasil tindakan korporasi) for the shares if the company is conducting a corporate action.

The above restrictions only apply to the regular market and cash market and not the negotiated market of the IDX.

After taking into account trading conditions, the IDX may amend the above provisions upon a decision of the IDX board of directors with prior approval from the OJK. Such amendment shall be announced in IDX and shall be effective, at the earliest, after three trading days from such announcement.

Trading of the Shares on the regular market of the IDX has been suspended since 22 March 2013. The closing price per Share on the regular market of the IDX on 21 March 2013 was Rp4,200. The Offer Price is Rp10,850. Given the disparity between these two prices, MDS expects that trading of Shares on the regular market will re-open on Tuesday, 26 March 2013 at the Offer Price. If for any reason the quoted price of the Shares on the regular market is not re-set at the Offer Price when trading recommences, the IDX auto rejection rules would apply to the quoted stock price of the Shares, which would prevent investors from trading the Shares at the Offer Price on the regular market of the IDX until the quoted stock price reaches a level of at least Rp9,042 and would result in the quoted stock price of the Shares on the regular market being materially below the Offer Price.

Information provided to IDX

The Company has provided certain information to the IDX regarding this transaction and has sought certain clarifications from the IDX which are set out in its letter to the IDX dated 25 March 2013, which is expected to be made available on the IDX website.

Offering, Listing and Reporting Regulations

OJK regulates and monitors securities issues that are publicly offered or listed in Indonesia. Initial securities offerings are generally conducted as underwritten public offers for sale by subscription. OJK regulates offering and allocation procedures.

Unless waived, companies are required to meet certain historical financial requirements in order to become listed on the IDX. Requirements for the listing on the IDX are set out in the Rule No. I-A, attachment to the Decision of the Board of Directors of IDX No. Kep-305/BEJ/07–2004 dated 19 July 2004 on Listing of Shares and Securities Convertible into Shares other than Shares issued by Listed Company.

Listed companies are required to submit to OJK and the IDX, among other things, the following documents:

Š an annual report to be submitted not later than four months after the end of the financial year of the company;

Š financial statements consisting of:

(i) an annual financial report audited by an accountant registered with OJK, to be submitted not later than three months after the end of the relevant financial year;

(ii) any of the following mid-year reports: (a) a mid-year report (unaudited), to be submitted not later than one month after the end of each mid-year term; (b) a mid-year report with limited review by an accountant registered with OJK, to be submitted not later than two months after the end of each mid-

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year term; or (c) a mid-year report audited by an accountant registered with OJK containing a full opinion on the fairness of such report, to be submitted not later than three months after the date of such report; and

(iii) quarterly reports, the preparation of which is required by the rules of the IDX, must be submitted to the IDX (a) a quarterly report (not audited or reviewed) to be submitted not later than one month after the end of each quarter; (b) a quarterly report with limited review by an accountant registered with OJK, to be submitted not later than two months after the end of each quarter; or (c) a quarterly report audited by an accountant registered with OJK containing of full opinion on the fairness of such report, to be submitted not later than three months after the end of each quarter.

Š material information that is important and relevant according to BAPEPAM-LK regulations and which may affect the value of the securities or an investment decision, such as a merger, acquisition, consolidation, stock split, stock dividend, change in management, replacement of public accountant, replacement of trustee, material legal claims and other important information possibly affecting share prices on the exchange no later than two working days after the occurrence of such material information;

Š a copy of any amendment to a company’s Articles of Association;

Š notice of any change in the composition of a company’s board of directors or board of commissioners;

Š notice of changes in the composition of Shareholders and business relations involving the company’s directors or commissioners and their family members in the listed companies or the affiliation of the listed companies; and

Š notice of any material deviation from projections published by the listed companies.

In addition, the annual financial statements submitted to OJK for any subsidiary of a listed company must be audited by a public accountant if the subsidiary in question fulfils any of the following requirements:

Š such subsidiary is a public company;

Š such subsidiary is engaged in a line of business related to the generation of public funds;

Š such subsidiary issues an acknowledgement of indebtedness;

Š such subsidiary has assets equal to or greater than Rp25 billion; or

Š the terms of any such subsidiary’s existing debt require it to audit its annual financial statements.

Insider trading, fraud and market manipulation of securities are prohibited under Indonesian capital markets laws. In such circumstances, a transaction may be cancelled or suspended by the IDX or OJK may suspend or revoke the licence of the capital market supporting institution and supporting professionals involved. A party engaging in (i) misleading conduct, fraud or falsification in connection with the sale of securities; (ii) other actions to mislead the public regarding trading activities, market conditions or price or (iii) insider trading, is liable for the loss incurred and faces a fine of up to Rp15 billion and imprisonment of up to ten years.

IDX LISTING, DELISTING AND CORPORATE GOVERNANCE RULES

The IDX listing rules for equity securities and regulations are aimed at enhancing good corporate governance and clarifying listing, re-listing and delisting criteria, sanctions for the violation of stock exchange rules and e-reporting and monitoring. The listing rules also introduced the two board system, comprising the Main Board and the Development Board.

The Main Board serves as the flag-carrier of the IDX and is intended for companies fulfilling regional listing standards relating to size, track record and net tangible assets. The Development Board allows both large and small companies with prospects but not yet qualified to list on the Main Board, as well as companies in the recovery phase, to be listed on the IDX.

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Initial Listing

A company is deemed qualified to undertake an initial listing on the Main Board of the IDX if it fulfils certain requirements including having:

Š a registration statement declared effective by OJK;

Š conducted an operational activity in the same core business for at least 36 consecutive months;

Š audited financial reports for the last three financial years, provided that the audited financial years for the last two financial years and the last interim audited financial report (if any) obtained an unqualified opinion;

Š net tangible assets pursuant to the last audited financial report of at least Rp100 billion;

Š the total shares owned by non-controlling shareholders (minority shareholders) of an unlisted public company or of a company that has been listed on another stock exchange in the period of five trading days prior to the listing application being the lower of (a) 100 million shares or (b) at least 35% of the paid up capital; and

Š the total number of shareholders with securities accounts at the securities exchange numbering at least 1,000, with the total number of shareholders being determined as follows: (i) for a private company conducting an initial public offering, the total number of shareholders shall be the number of total shareholders following the completion of the initial public offering; (ii) for a unlisted public company, the total number of shareholders shall be the total number of shareholders as of, at the latest, one month prior to the listing application; (iii) for a company that has already been listed on another stock exchange, the total number of shareholders shall be calculated based on the monthly average during the last six months.

Under the listing rules, a company is deemed qualified to undertake an initial listing on the Development Board if it fulfils certain requirements including having:

Š a registration statement declared effective by OJK;

Š net tangible assets of at least Rp5 billion;

Š operated at least for the past 12 consecutive months in the same core area of business activity;

Š an unqualified audit opinion from the auditor covering its financial reports for the last 12 months and the last audited interim report (if any);

Š for a company which has made a loss or has not made any profit or has been operating for less than two years, (1) based on its financial projection to be announced in the stock exchange, at the latest at the end of the second financial year as of the listing date, it obtains business and net profits; or (2) based on its financial projection by no later than at the end of the company’s sixth financial year as of the listing date, it obtains business and net profits, especially if the proposed listed company is a company that by nature of its business will likely require a longer period of time to reach a break-even point (such as companies in the infrastructure, plantation, forestry industries or in the public service sectors);

Š at least 500 shareholders holding securities accounts with stock exchange members, with the number of shareholders being determined as follows: (i) for private company conducting an initial public offering, the total number of shareholders shall be the number of total shareholders following the completion of the initial public offering; (ii) for an unlisted public company, the total number of shareholders shall be the total number of shareholders for the latest one month prior to the listing application; (iii) for a company that is already listed on another stock exchange, the total number of shareholders shall be calculated based on the monthly average during the last six months;

Š total shares owned by minority shareholders immediately after the initial listing within five stock exchange days before the listing application numbering at least a total of 50 million shares or comprising 35% per cent. of the total paid up capital; and

Š full commitment underwriting from the underwriters.

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The Company is currently listed on the Development Board. The rules allow a company listed on the Development Board to be transferred to the Main Board if it fulfils the requirement for listing on the Main Board.

Delisting

A company can be delisted voluntarily or involuntarily by the stock exchange. A Company can be delisted if it fulfils one of the following conditions: (i) suffers certain conditions which adversely affect the going concern of the Company, financially or legally, or adversely affect the continuing status of the Company as a publicly listed company and the Company has not shown any sufficient remedial actions; or (ii) the Shares are suspended from regular market and cash market and may only be traded in the negotiation market at least for the last 24 months.

Under IDX Listing Regulation No. I-A, a listed company must have:

Š independent commissioners comprising at least 30% of the total number of members of the board of commissioners;

Š an audit committee;

Š a corporate secretary;

Š at least one non-affiliated director; and

Š a nominal value of shares of at least Rp100.

Based on a decision of the Chairman of BAPEPAM-LK No. Kep-643/BL/2012 on Regulation No. IX.I.5 concerning the Formation and Implementation Guidance for Audit Committee, issued in 7 December 2012 (“BAPEPAM-LK Regulation No. IX.I.5”) and IDX Listing Regulation No. I-A, an independent Commissioner in a listed company must:

Š come from outside of the listed company;

Š not own any shares of the listed company, directly or indirectly;

Š not have an affiliated relationship with the listed company, or with any commissioner, director or controlling shareholder or principal shareholders of the listed company concerned;

Š have no business relationship which is directly or indirectly related to the listed company’s business activity;

Š not be individuals who have responsibility for and authority to plan, lead or control the listed company’s activities within the last six months;

Š have adequate knowledge of all relevant capital markets regulations; and

Š not be an insider of the public accountant, legal consultant or other party who gives audit, non-audit or other consultation services to the company that personally audits the financial statements of the listed company in the last six months.

A listed company’s audit committee must be comprised of at least three members, one of whom must be an independent commissioner who will serve as chairman of the audit committee. The other members must also be independent persons, at least one of whom must be an expert in the field of accounting and/or finance.

Each member of the audit committee must:

Š have high integrity, ability, knowledge and adequate experience (including any relevant educational qualifications) and be able to communicate properly;

Š be capable of reading and understanding financial reports, with at least one of the members of the audit committee having an educational qualification in accountancy or finance;

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Š have adequate knowledge of all relevant capital market regulations;

Pursuant to IDX Listing Regulation No. I-A, a non-affiliated director in a listed company:

Š must not have an affiliated relationship with the company’s controlling shareholders for at least six months before his appointment as a non-affiliated director in a listed company;

Š must not have an affiliated relationship with commissioners or other directors of the listed company;

Š must not act as a director of another company; and

Š must not be an insider at a capital market supporting professional or institution of which his/its service was used by the listed company for six months before his appointment as a director of the listed company.

The function of the corporate secretary is performed by one of the directors of the listed company, or an official of the listed company designated to carry out such function. The corporate secretary acts as a liaison or contact person between the listed company, government authorities, including OJK, and the public. The corporate secretary must have access to material and relevant information relating to the listed company and must be familiar with all statutory regulations relating to capital markets, particularly on disclosure matters.

KSEI

In 1997, a private limited company, the Indonesian Central Securities Depository (PT Kustodian Sentral Efek Indonesia,“KSEI”), was established to serve as Indonesian central securities clearing house. On November 11 1998, KSEI obtained a licence from OJK to act as an approved central securities depositary and settlement institution. The shareholders of KSEI currently comprises 27 securities firms, nine custodian banks, four Share Registrars, the IDX and KPEI. In 2000, KSEI introduced the Central Depositary and Book Entry Settlement System (“C-Best”), a computerised system for the registration and settlement of securities.

In 2000, OJK implemented regulations to provide for the scripless trading system. Under the scripless system, a member broker, sub-broker or local custodian (“KSEI Participant”) may deposit with KSEI certificates evidencing ownership of securities upon making KSEI the registered holder of those securities. Any institution becoming a KSEI participant, is required to open at least one account with KSEI for deposit, withdrawal or transfer of securities. After KSEI has accepted a deposit of any securities, it will hold such securities on behalf of its participants’ clients and, as such, investors obtain a beneficial (rather than direct) interest in the shares, which is convertible into a physical share certificate at the direction of the investor. Thus, to establish ownership rights, each holder of an account for deposit, withdrawal and/or transfer of securities (“KSEI Account Holder”) is obliged to maintain a list of the owners of securities deposited with it. Sales and purchases of securities are settled on the relevant securities deposit account via a computer system. At the end of each trading day, KSEI delivers a statement showing the balance of securities held for each participant.

A company that intends to register their securities with KSEI enters into a standard registration agreement with KSEI. Subsequently, KSEI Account Holders or KSEI Participants must issue confirmations for the benefit of KSEI for the entire value of the securities deposited with KSEI.

Securities registered with KSEI are recorded and administered electronically in securities accounts opened with KSEI (“KSEI Securities Accounts”) and KSEI Account Holders administer deposits, withdrawals and transfers of securities through their KSEI Securities Accounts. Parties that are eligible to become KSEI Account Holders are (i) securities companies, (ii) custodian banks and (iii) other parties determined by the prevailing capital market laws and regulations. In addition, any institution becoming a KSEI Participant is required to open at least one securities account with KSEI. Each KSEI Account Holder who maintains subscribers’ securities and funds must also open sub-accounts for the deposit of securities and funds on behalf of their customers.

In accordance with the KSEI rules on Central Depository Services, C-Best is the central computerised system for depository services and the settlement of securities transactions by book entry settlement. C-Best is provided by KSEI to KSEI Account Holders. Sales, purchases and conveyances of securities are settled through the C-Best system by setting off the relevant securities in the appropriate KSEI Securities Accounts. At the end of each trading day, KSEI delivers, through the C-Best system, a statement to each KSEI Account Holder showing the balance of securities held by that KSEI account holder.

Page 214 ------26. INDONESIAN CAPITAL MARKETS ------

Under a circular letter issued by OJK dated 23 November 2001, issuers of shares were required to register their shares with the central depositary prior to 30 June 2002. Further, on 15 January 2003, OJK issued a new regulation, effective at 1 May 2003, which require each KSEI Participant holding securities on behalf of client to:

Š establish a securities sub-account on behalf of each client and record each client’s securities account in such sub-account;

Š ensure that the balance in the customer’s security accounts in the KSEI Participant’s book is always equivalent with the balance in the sub-account with KSEI;

Š take measures to ensure that the identity of each client is properly recorded by the KSEI Participant; and

Š take measures to ensure that the securities sub-account balance of each client is and remains correct.

How KSEI is regulated and managed

KSEI is a self-regulating organisation and is licensed and regulated by OJK. Under KSEI’s rules, securities companies or custodian banks fulfilling certain criteria and authorised by OJK may become KSEI Participants. The principal shareholders of KSEI are large custodian banks, securities companies, broker dealers, share registrars, the IDX and KPEI. In the scripless system, the role of KSEI is to settle the transaction and act as central securities depositary, while fund settlement is conducted by KPEI.

KSEI is managed by a board of directors as supervised by a board of commissioners who are subject to the provisions of the Company Law. KSEI is also a member of several international associations that are related to securities depositories, including the Association of National Numbering Agency, the International Society of Securities Administrators, the Society for Worldwide Inter-bank Financial Telecommunication and Asia Pacific Central Securities Depositories Group.

OJK sets strict standards for the internal controls of KSEI. These standards call for daily reconciliation of account balances between KSEI and the issuers whose securities are held in the name of KSEI. This daily reconciliation is required to be verified continuously by the head of the audit unit of KSEI who must report this verification to the board of Directors of KSEI. Each KSEI Participant has the right to send auditors to KSEI to verify the reconciliation of its accounts with those of KSEI including the right of the KSEI Participant to send auditors to verify the registry of the securities on the books of the issuer.

The internal control systems of KSEI are required to be audited annually by an independent auditor with international experience and an international reputation, including a review of the protections against fraud, embezzlement, natural disruptions and electronic damage. This report is to be sent to all KSEI shareholders along with KSEI’s annual report.

The regulations call for a number of fundamental security measures to ensure the integrity of KSEI:

Š access to the data processing functions, record-keeping functions and customer account services areas of KSEI is required to be restricted;

Š KSEI must have a primary computer and back-up computer at a different location that allows continued processing within two hours of a breakdown of the primary computer;

Š duplicate electronic records are required to be maintained in repositories that are at least 30 kilometres apart from each other;

Š software development and maintenance are required to be segregated from data processing operations; and

Š a special security division of KSEI’s own funds is required to be segregated from data processing operations, all debits and credits to securities accounts must be based on instructions of account holders and controlled by a division that is separate from the data processing division.

Page 215 ------26. INDONESIAN CAPITAL MARKETS ------

In addition to the oversight of internal controls and specific regulations regarding recovery and security, the legal basis for securities accounts permits recovery of an investor’s assets even in the event of destruction of all records of KSEI. This is done based on investor’s confirmations and statements and records of the issuer, all of which are maintained independently from records of KSEI. With daily reconciliation of key records, strong internal control supervision by major banks, special security measures, and legal safeguards, recovery is possible even if there is a catastrophic occurrence.

TRANSFERS OF SHARES

Transfers of listed shares on the IDX are governed by the Company Law and IDX Rules. Under the Company Law, as a general matter, ownership of shares is based on the registration of ownership in the relevant company’s share register. To be valid against the issuing company, a request for an entry of the transfer into a shares register must be received by the company. To be valid against a third party, the entry of the transfer must actually be made into the share register.

Transfers of scripless shares are made by way of appropriate instructions to the relevant brokers, sub-brokers or custodians with whom the transferor and the transferee involved maintain securities accounts in accordance with the individual arrangements with such brokers, sub-brokers or custodians. Upon receipt of such instructions, the relevant brokers, sub-brokers or custodians will, in accordance with such arrangements, effect the relevant changes in the register they are required to maintain for rights and entitlements purposes.

As at 30 June 2002, only shares held through KSEI (and which have not been pledged, foreclosed upon based on a court order or seised for the purpose of criminal proceedings) may be traded on the IDX.

Securities transaction settlement services are part of the central depository services provided for the fulfilment of the rights and obligations as the results of stock exchange transactions or over-the counter transactions by means of the transfer of securities and or funds between securities accounts. The settlement of stock exchange transactions is performed by KSEI based on transfer instructions received from a selling Clearing Member (defined as a member of the stock exchange registered as the KSEI Clearing Member). Alternatively, the KSEI may settle over-the- counter transactions based on a transfer instruction from a selling KSEI Account Holder and acceptance from a buying KSEI Account Holder and the availability of sufficient securities in the sub-account, which must include the requirement of payment or without payment. Upon the complete transfer of securities and or funds, KSEI submits a report to KPEI or to the Clearing Member on the settlement of stock exchange transaction and confirmation is given to the relevant KSEI Account Holder on the settlement of over-the-counter transactions.

A transfer of more than 50% of the issued shares of a public company or the acquisition of direct or indirect control of the management of a public company will be deemed to be an acquisition of a public company and trigger a tender offer by the new controlling shareholder. The new controlling shareholder will have to conduct a tender offer for all the other shares in the public company, except for: (i) shares owned by shareholders who are acting in conjunction with the new controlling shareholders, (ii) shares owned by other parties who have received an offer on the same terms and conditions as the new controlling shareholder, (iii) shares owned by other parties who are conducting a tender offer at the same time on the same company’s shares, (iv) shares owned by the majority shareholders, and (v) shares owned by the other controlling shareholders in the public company. If the tender offer results in the new controlling shareholder holding more than 80% of the total paid-up capital in the public company, the new controlling shareholder must transfer or refloat a certain amount of the shares to the public so that at least 20% of the total paid-up shares in the public company is owned by the public and spread among at least 300 parties within two years after the completion of the tender offer.

REPORTING REQUIREMENTS

According to the decision of the Chairman of BAPEPAM-LK No. Kep-82/PM/1996, dated 17 January 1996 on Regulation No. X.M.1 concerning the Disclosure Requirements for Certain Shareholders, the director or commissioner of a listed company or a listed company must report to OJK with regard to their ownership and the changes of ownership of the shares in the listed company or public company within 10 calendar days of the transaction. Such reporting obligation also applies to a shareholder that owns 5% or more of the paid up capital in the listed company or public company.

A copy of such report must be made available to the public and can be obtained at OJK’s office.

Page 216 ------27. SUMMARY OF CERTAIN DIFFERENCES BETWEEN IFAS AND IFRS ------

The historical financial information of the Company included in this Offering Circular have been prepared and presented in conformity with IFAS. Certain differences exist between IFAS and IFRS which might be material to the financial information herein. The matters described below summarise certain differences between IFAS and IFRS that may be material. The Company is responsible for preparing the summary below. The Company has not prepared a complete reconciliation of its financial statements and related footnote disclosures between IFAS and IFRS and has not quantified such differences. Accordingly, no assurance is provided that the following summary of differences between IFAS and IFRS is complete. In making an investment decision, investors must rely upon their own examination of the Company, the terms of the offering and the financial information. Potential investors should consult their own professional advisers for an understanding of the differences between IFAS and IFRS, and how those differences might affect the financial information herein.

BUSINESS COMBINATIONS OF ENTITIES UNDER COMMON CONTROL

IFAS

Under IFAS, business combinations among entities under common control are accounted for in accordance with PSAK No. 38 ‘Accounting for Restructuring Transactions of Entities Under Common Control’. In accordance with PSAK No. 38, assets and liabilities transferred in the restructuring transaction of entities under common control are recognised at book value in the same manner as a business combination that is accounted for using the pooling of interest method. The difference between the transfer price and the book value arising from the restructuring transactions of entities under common control is not goodwill, but should be recorded under the account “Difference in Value from Restructuring Transactions among Entities under Common Control” and presented as a component of the equity section in the statement of financial position.

The balance of the account “Difference in Value from Restructuring Transactions among Entities under Common Control” can change when there are reciprocal transactions between entities under common control, there is quasi-reorganisation, loss of under common control substance between transacting entities, or transfer of assets, liabilities, equity or other ownership instruments that caused the difference from restructuring under common control entities transactions to another party who is not under common control.

IFRS

There is currently no guidance in IFRS on the accounting treatment for combinations among entities under common control. In such a case where there is no specifically applicable standard or interpretation in IFRS, an entity develops an accounting policy that is reliable and that is relevant to the decision-making needs of users. The entity first considers the requirements and guidance in other international standards and interpretations dealing with similar issues, and then the content of the conceptual framework of the International Accounting Standards Board.

In practice, an entity may choose to apply either the acquisition method under IFRS or the predecessor accounting that is line with US or UK GAAP to account for the business combinations between entities under common control.

The acquisition method under IFRS requires the acquirer to measure the identifiable assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the amount of non-controlling interest recognised over the net identifiable assets acquired and liabilities assumed.

In applying the predecessor accounting, the assets and liabilities of the combining entities are reflected at their carrying amounts and no goodwill is recognised as a result of the combination.

SEGMENT INFORMATION

IFAS

Under IFAS, prior to 1 January 2011, segment information was prepared and reported using the accounting policies adopted for preparing and presenting the financial statements. An entity was required to report both business segments and geographical segments, and identify one as the primary and the other as the secondary.

Page 217 ------27. SUMMARY OF CERTAIN DIFFERENCES BETWEEN IFAS AND IFRS ------

The dominant source and nature of the entity’s risks and returns govern the designation as primary and secondary. Effective 1 January 2011, the operating segments were determined based on the internal reports reviewed by the chief operating decision maker to assess performance and allocate resources.

IFRS

Under IFRS, an entity is required to present segment information based on operating segments. Operating segments are identified on the basis of internal reports on the components of the Company that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

Page 218 ------28. ADDITIONAL INFORMATION ------

ADDRESSES OF PARTIES INVOLVED IN THE OFFERING

Joint Global Coordinators and CIMB Bank (L) Limited Joint Bookrunners Level 14A, Main Office Tower, Financial Park Labuan, Jalan Merdeka, (in alphabetical order) 87000 Federal Territory Labuan Malaysia

Morgan Stanley & Co. International plc 25 Cabot Square, Canary Wharf London E14 4QA United Kingdom

UBS AG, Singapore Branch One Raffles Quay #50-01 North Tower Singapore 048583

Co-Lead Managers PT Mandiri Sekuritas Plaza Mandiri, 28th Floor (in alphabetical order) Jl. Jend. Gatot Subroto, Kav. 36-28 Jakarta 12190 Indonesia

Maybank Kim Eng Securities Pte Ltd 50 North Canal Road Singapore 059304

Standard Chartered Securities (Singapore) Pte. Limited 8 Marina Boulevard, Marina Bay Financial Centre, Tower 1 #19-01, Singapore 018981

Financial Advisers to ACC and Moelis & Company Asia Limited MAC Suite 1708-9, One Pacific Place 88 Queensway, Admiralty Hong Kong

Legal Advisers to ACC and the As to English and United States federal laws: Company Freshfields Bruckhaus Deringer 42-01, Ocean Financial Centre, 10 Collyer Quay, Singapore 049315

Legal Adviser to ACC As to Indonesian laws:

Makes & Partners Law Firm Menara Batavia 7th Floor Jl. K.H. Mas Mansyur Kav. 126 Jakarta 10220 Indonesia

Legal Adviser to Multipolar As to Indonesian Laws:

Nindyo & Associates H Tower, 16th Floor, Unit B2 JI. H.R. Rasuna Said Kav. C20-21 Jakarta 12940 Indonesia

Page 219 ------28. ADDITIONAL INFORMATION ------

Legal Advisers to the Company As to English and United States federal laws:

Clifford Chance Marina Bay Financial Centre, 25th Floor, Tower 3, 12 Marina Boulevard, Singapore 018982

As to Indonesian laws:

Hiswara Bunjamin & Tandjung (HBT) 23rd Floor, Gedung BRI II Jl. Jend. Sudirman Kav 44-46 Jakarta 10210, Indonesia

Legal Advisers to the Joint As to English and United States federal laws: Global Coordinators and Joint Bookrunners and Co-Lead White & Case Pte. Ltd. Managers 8 Marina View #27-01 Asia Square Tower 1 Singapore 018960

As to Indonesian laws:

Hadiputranto, Hadinoto & Partners The Indonesia Stock Exchange Building Tower II, 21st Floor Sudirman Central Business District Jl. Jendral Sudirman Kav 52-53 Jakarta 12190, Indonesia

Independent Public Accountants KAP Tanudiredja, Wibisana & Rekan (a member of PwC global network) Plaza 89, JI.H.R. Rasuna Said KAV X-7, No. 6 Jakarta 12940, Indonesia

Page 220 ------29. GLOSSARY AND DEFINITIONS ------

“ACC” Asia Color Company Limited, a company incorporated as an exempted limited liability company in the Cayman Islands with registered office PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands

“ACH” Asia Color Holdings Limited

“Acquisition” the acquisition by MI of 98% of MDS’ issued share capital from MPP and Pacific Asia Holdings Ltd on 1 April 2010

“Affiliate” has the meaning given in Rule 501(b) of Regulation D or Rule 405 under the US Securities Act, as applicable, and the term “affiliated” should be construed accordingly

“Articles of Association” or “Articles” the articles of association of the Company (as amended from time to time)

“Audit Committee” the audit committee of the Company from time to time

“BAPEPAM-LK” the Indonesian Capital Markets and Financial Institution Supervisory Agency (Badan Pengawas Pasar Modal and Lembaga Keuangan)

“Board of Commissioners” the board of commissioners of the Company from time to time

“Board of Directors” the board of directors of the Company from time to time

“Board of Management” the board of management of the Company from time to time

“Bursa Pararel” PT Bursa Pararel Indonesia

“CAGR” compound annual growth rate

“CIMB” CIMB Bank (L) Limited

“CMSA” the Capital Markets and Services Act 2007 of Malaysia

“Co-Lead Managers” PT Mandiri Sekuritas, Maybank Kim Eng Securities Pte Ltd and Standard Chartered Securities (Singapore) Pte. Limited

“Commissioner” a commissioner of the Company

“Company” or “MDS” PT Matahari Department Store Tbk, a company incorporated with limited liability under the laws of Indonesia or the Matahari department store business, as applicable

“Company Law” Law. No. 40 of 2007 regarding Limited Liability Companies

“Conflict of Interest” The difference between the economic interest of the company and the economic interest of a member of the Board of Directors, the Board of Commissioners or a substantial shareholder of the company, which may cause a loss to the company.

“Consignment Goods” goods that are sold in the Company’s stores that come from consignment vendors

“Cornerstone Investors” Azentus Global Opportunities Master Fund Limited, BlackRock Asset Management North Asia Limited – Fundamental Equities Portfolio

Page 221 ------29. GLOSSARY AND DEFINITIONS ------

Management Group – APAC Investment Team. Capital Research and Management Company, Employees Provident Fund Board, FIL Investment Management (Hong Kong) Limited, Fullerton Fund Management Company Ltd (a wholly owned subsidiary of Temasek), Goldman Sachs Profit Sharing Master Trust, Gordel Capital Limited, Government of Singapore Investment Corporation Private Limited, GS Investment Strategies, LLC, Hwang Investment Management BHD, Morgan Stanley Investment Management Company, Myriad Opportunities Master Fund Limited, OZ Asia Master Fund, Ltd., OZ Equity Long-Short Master Fund, Ltd., OZ Eureka Fund, L.P., OZ Global Special Investments Master Fund, L.P., OZ ELS Master Fund, Ltd., OZ Master Fund, Ltd, OZEA, L.P., PT Schroder Investment Management Indonesia, Quantum Partners LP and T.Rowe Price Hong Kong Limited.

“CV Sales” the sales of Consignment Goods which are sold in the Company’s stores

“CVC” CVC Capital Partners SICAV-FIS S.A. and its subsidiaries and affiliates, and investment funds managed or advised by such entities

“CVC Funds” CVC Capital Partners Asia Pacific III L.P. and CVC Capital Partners Asia Pacific III Parallel Fund – A, L.P.

“Director” a director of the Company

“DP Goods” goods that have been directly purchased by the Company

“DP Sales” the Company’s sales of DP Goods

“EU” the European Union

“Financial Adviser” Moelis & Company Asia Limited has been appointed as financial adviser to provide financial advisory services in relation to the Offering to ACC and MAC. The role of the financial adviser is separate and distinct from the role of the Joint Global Coordinators and Joint Bookrunners. Principal functions performed by the financial adviser include: advising on the selection and appointment of syndicate members and other professional advisers; assisting in coordinating the work of other professional advisers; reviewing relevant documentation in relation to the Offering; and advising on timing and market positioning of the Offering. The Joint Global Coordinators and Joint Bookrunners have not relied on the work performed by Moelis & Company Asia Limited in fulfilling their duties

“GIC” Government of Singapore Investment Corporation Pte Ltd.

“Gross Sales” the gross transactional value of the sales in the Company’s stores after discounts excluding value added tax. Gross Sales comprise DP Sales, CV Sales, revenue from the MCC programme and tenant income, adjusted for certain other items

“IDX” or “Indonesia Stock Exchange” the Indonesia Stock Exchange managed by PT Bursa Efek Indonesia

Page 222 ------29. GLOSSARY AND DEFINITIONS ------

“IFAS” Indonesian Financial Accounting Standards

“IFRS’ International Financial Reporting Standards

“Indonesia” the Republic of Indonesia

“JIBOR” the Jakarta Interbank Offered Rate

“JSX” the Jakarta Stock Exchange

“KPEI” PT Kliring dan Penjaminan Efek Indonesia

“KSEI” PT Kustodian Sentral Efek Indonesia

“Latest Practicable Date” 20 March 2013

“LMIR REIT” Lippo Malls Indonesia Retail Trust

“LPPF” the code under which the Shares are listed on the IDX

“MAC” Meadow Asia Company Limited

“MAH” Meadow Asia Holdings Limited

“Management” the executive management of the Company

“Manager” a member of the Management

“MAPI” Mitra Adiperkasa

“Matahari Group/MPP” PT Matahari Putra Prima Tbk

“Matahari Pacific” PT Matahari Pacific

“Merger” the merger between MI and MDS on 30 September 2011, with MDS as the surviving entity

“MCC” Matahari Club Card

“MFPs” the Company’s measures of financial performance

“MI” PT Meadow Indonesia

“Minority Shareholders” Shareholders collectively representing at least 10% of the total issued and paid up Share capital of the Company

“Morgan Stanley” Morgan Stanley & Co. International plc

“MPP” PT Matahari Putra Prima Tbk

“Multipolar” PT Multipolar Tbk

“Offering” The offer of 1,342,245,500 Offer Shares by the Selling Shareholders, including the maximum number of Over-allotment Shares (as defined below) by the Selling Shareholders:

(i) through the Joint Global Coordinators and Joint Bookrunners to qualified institutional buyers in the United States in reliance on Rule 144A under the US Securities Act, and

Page 223 ------29. GLOSSARY AND DEFINITIONS ------

(ii) in offshore transactions as defined by Regulation S under the US Securities Act:

(a) outside Indonesia, Malaysia and the United States through the Joint Global Coordinators and Joint Bookrunners;

(b) in Indonesia, to not more than 100 persons and sold to not more than 50 persons, and are not being offered through the public media, through a private placement. and

“Offering Circular” this offering circular dated 25 March, 2013

“Offer Price” the price at which each Share is to be sold under the Offering

“Offer Shares” 1,167,170,000 of the Company’s Shares and up to 175,075,500 additional Over-allotment Shares offered by the Selling Shareholders during the Offering

“OJK” Indonesian Financial Services Authority (Otoritas Jasa Keuangan), who took over the function, duty and authority of the supervision and regulation of financial service activities in capital markets, insurance, pension funds, finance companies and other financial service institutions sectors from the BAPEPAM-LK effective 31 December 2012

“Over-allotment Option” the over-allotment granted to the Stabilising Manager by the Over- allotment Shareholder to purchase, or procure purchasers for, up to 175,075,500 additional Shares as more particularly described in Section 2 – “Summary of the Offering”

“Over-allotment Shareholder” ACC

“Over-allotment Shares” the Shares granted under the Over-allotment Option

“PFIC” a passive foreign investment company

“Professional Investors” professional investors referred to in Section 708(11) of the Act

“PSAK” Pernyataan Standar Akuntansi Keuangan

“qualified institutional buyers” or has the meaning given by Rule 144A under the US Securities Act “QIBs”

“Registered Shareholders” the Shareholders whose names are recorded in the Register of Shareholders

“Regulation S” Regulation S under the US Securities Act

“Relevant Persons” persons to whom this Offering Circular can be lawfully distributed to under UK law and regulation

Page 224 ------29. GLOSSARY AND DEFINITIONS ------

“Rupiah” or “Rp” Indonesian rupiah, the lawful currency of Indonesia

“Rule 144A” Rule 144A under the US Securities Act

“Salween” Salween Investment Pte Ltd , an affiliate of GIC

“SEC” the United States Securities and Exchange Commission

“Selling Shareholders” Asia Color Company Limited and PT Multipolar Tbk

“Share Registrar” PT Sharestar Indonesia, a stock administration bureau

“Shareholders” the holders of capital of the Company

“Shares” the ordinary shares of the Company (including type A ordinary shares with a nominal value of Rp5,000 each, type B ordinary shares with a nominal value of Rp350 each and type C ordinary shares with a nominal value of Rp100 each), each having the rights as set out in the Articles of Association. There are no differences in the rights afforded to holders of type A, type B and type C Shares, including with regard to voting rights, rights to receive dividends, and rights upon liquidation where they all participate pari passu on a per Share basis despite the differences in nominal value. Each of these types of Shares is fungible with each other and trade on the IDX under the symbol of “LPPF”

“Stabilising Manager” UBS

“SSSG” the change in Gross Sales contribution made by stores that have been in operation for at least one complete calendar year (1 January to 31 December) at the beginning of the period

“SSX” the Surabaya Stock Exchange

“Trade Date” the expected date of delivery of the Shares against payment

“UBS” UBS AG, Singapore Branch

“UK” the United Kingdom of Great Britain and Northern Ireland

“Joint Global Coordinators and CIMB, Morgan Stanley and UBS Joint Bookrunners”

“Underwriters” CIMB, Morgan Stanley and UBS

“Underwriting Agreement” the underwriting agreement entered into by and among the Company, the Selling Shareholders, MAC and the Joint Global Coordinators and Joint Bookrunners dated 25 March 2013

“United States” or “US” the United States of America, its territories and possessions, any State of the United States of America, and the District of Columbia

“US Internal Revenue Code” the US Internal Revenue Code of 1986, as amended

“USD” or “US dollar” United States dollars, the lawful currency of the United States

“US Exchange Act” United States Securities Exchange Act of 1934, as amended

Page 225 ------29. GLOSSARY AND DEFINITIONS ------

“US Securities Act” United States Securities Act of 1933, as amended

“VisioNet” PT VisioNet International

“2013 Shareholder Reorganisation” the reorganisation of the shareholding structure of MDS which took place in 2013 as described in Section 15 – “Corporate and Shareholding Structure – Shareholder reorganisation prior to Offering”

Page 226 INDEX TO FINANCIAL STATEMENTS Financial Statements for the years ended 31 December 2010, 2011 and 2012

F-PAGE

BOARD OF DIRECTORS’ STATEMENT ...... F-3 INDEPENDENT AUDITOR’S REPORT ...... F-5 STATEMENTS OF FINANCIAL POSITION ...... F-7 STATEMENTS OF COMPREHENSIVE INCOME ...... F-9 STATEMENTS OF CHANGES IN EQUITY ...... F-10 STATEMENTS OF CASH FLOWS ...... F-12 NOTES TO THE FINANCIAL STATEMENTS ...... F-14

F-1 PT MATAHARI DEPARTMENT STORE Tbk

LAPORAN KEUANGAN/ FINANCIAL STATEMENTS

31 DESEMBER 2012, 2011 DAN 2010/ 31 DECEMBER 2012, 2011 AND 2010

F-2 F-3 F-4 F-5 F-6 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 1/1 Schedule

LAPORAN POSISI KEUANGAN STATEMENTS OF FINANCIAL POSITION 31 DESEMBER 2012, 2011 DAN 2010 AS AT 31 DECEMBER 2012, 2011 AND 2010 (Dinyatakan dalam jutaan Rupiah, (Expressed in millions of Rupiah, kecuali dinyatakan lain) unless otherwise stated)

Catatan/ Notes 2012 2011 2010

Aset Assets

Aset lancar Current assets Kas dan setara kas 5 999,872 918,974 999,240 Cash and cash equivalents Piutang usaha Trade receivables - pihak ketiga 57,654 46,274 14,078 third parties - Piutang lain-lain Other receivables - pihak ketiga 15,920 19,999 16,582 third parties - Persediaan 6 519,601 462,013 400,784 Inventories Pajak dibayar dimuka Prepaid taxes - pajak lain-lain 11a 44,722 45,821 23,728 other tax - Biaya dibayar dimuka Prepaid expenses - sewa 8 73,696 49,190 28,041 lease - - lain-lain 6,361 5,114 7,319 others - Uang muka sewa 8 13,653 11,208 23,261 Rental advances Aset lancar lainnya 12,741 8,742 11,289 Other current assets

Jumlah aset lancar 1,744,220 1,567,335 1,524,322 Total current assets

Aset tidak lancar Non-current assets Kas dan setara kas yang Restricted cash and cash dibatasi penggunaannya 5 39,187 37,130 36,087 equivalents Uang muka pembelian Advances for purchase aset tetap 14,739 16,404 3,504 of fixed assets Aset pajak tangguhan 11d 53,851 58,619 15,990 Deferred tax assets Aset tetap Fixed assets (setelah dikurangi (net of accumulated akumulasi penyusutan depreciation of sebesar Rp 489.742; Rp 489,742; 2011: Rp 316.904 2011: Rp 316,904; 2010: Rp 163.057) 7 694,005 622,891 572,099 2010: Rp 163,057) Sewa jangka panjang Long-term lease - pihak ketiga 8 270,098 29,807 14,478 third parties - Uang jaminan 89,331 74,490 66,660 Refundable deposits Piutang lain-lain Other receivables - pihak berelasi 25b 2,413 - - related party - Aset tidak lancar lainnya 21,908 15,796 12,044 Other non-current assets

Jumlah aset tidak lancar 1,185,532 855,137 720,862 Total non-current assets

Jumlah aset 2,929,752 2,422,472 2,245,184 Total assets

Catatan atas laporan keuangan merupakan bagian yang tidak The accompanying notes form an integral part of terpisahkan dari laporan keuangan. these financial statements.

F-7 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 1/2 Schedule

Catatan/ Notes 2012 2011 2010 Liabilitas dan ekuitas Liabilities and equity

Liabilitas Liabilities

Liabilitas lancar Current liabilities Utang usaha Trade payables - pihak ketiga 9 1,054,745 891,198 718,478 third parties - Utang lain-lain Other payables - pihak ketiga 85,386 57,568 65,106 third parties - Utang pajak 11b Taxes payable - pajak penghasilan badan 181,340 113,836 138,691 corporate income taxes - - lain-lain 9,675 14,011 27,395 others - Akrual 10 270,766 253,357 208,207 Accruals Penghasilan tangguhan 84,358 93,388 60,479 Deferred income Pinjaman bank jangka panjang Long-term bank loans - bagian jatuh tempo dalam portion due - satu tahun 12 483,935 284,947 233,255 within one year

Jumlah liabilitas lancar 2,170,205 1,708,305 1,451,611 Total current liabilities

Liabilitas tidak lancar Non-current liabilities Pinjaman bank jangka panjang Long-term bank loans - bagian jatuh tempo portion due - lebih dari satu tahun 12 2,475,161 2,082,511 2,733,774 over one year Akrual - 91,478 84,410 Accruals Pinjaman dari pihak ketiga 23 - 1,069,746 1,000,000 Loan from third party Kewajiban imbalan kerja 21 215,918 172,845 140,954 Employee benefits obligations

Jumlah liabilitas tidak lancar 2,691,079 3,416,580 3,959,138 Total non-current liabilities

Jumlah liabilitas 4,861,284 5,124,885 5,410,749 Total liabilities

Ekuitas Equity

Modal saham - Share capital - Modal dasar 3.911.120.640 Authorised capital lembar saham, 3,911,120,640 shares, modal ditempatkan dan issued and fully paid disetor penuh 2.917.918.080 2,917,918,080 shares lembar saham yang terdiri dari: that consist of: 6.168.960 lembar saham 6,168,960 type A seri A dengan nilai nominal shares with par value Rp 5.000 per saham Rp 5,000 per share (nilai penuh); 259.096.320 (full amount); 259,096,320 lembar saham seri B dengan type B shares with nilai nominal Rp 350 per saham par value Rp 350 per share (nilai penuh); 2.652.652.800 (full amount);2,652,652,800 lembar saham seri C dengan type C shares with nilai nominal Rp 100 par value Rp 100 per saham (nilai penuh) 13 386,794 386,794 386,794 per share (full amount) Tambahan modal disetor 14 195,192 195,192 195,192 Additional paid in capital Difference in value from Selisih nilai transaksi restructuring transactions restrukturisasi entitas among entites under sepengendali 2u,3 (3,767,126) (3,767,126) (3,767,126) common control Saldo laba Retained earnings - Dicadangkan 15 10,950 6,250 - Appropriated - - Tidak dicadangkan 1,242,658 476,477 19,575 Unappropriated -

Jumlah ekuitas (1,931,532) (2,702,413) (3,165,565) Total equity

Jumlah liabilitas dan ekuitas 2,929,752 2,422,472 2,245,184 Total liabilities and equity

Catatan atas laporan keuangan merupakan bagian yang tidak The accompanying notes form an integral part of terpisahkan dari laporan keuangan. these financial statements.

F-8 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 2 Schedule

LAPORAN LABA RUGI KOMPREHENSIF STATEMENTS OF COMPREHENSIVE INCOME UNTUK TAHUN YANG BERAKHIR FOR THE YEARS ENDED 31 DESEMBER 2012, 2011 DAN 2010 31 DECEMBER 2012, 2011 AND 2010 (Dinyatakan dalam jutaan Rupiah, (Expressed in millions of Rupiah, kecuali dinyatakan lain) unless otherwise stated)

Catatan/ Notes 2012 2011 2010* Pendapatan Revenue Penjualan eceran 3,174,824 2,595,432 1,901,773 Retail sales Penjualan konsinyasi - bersih 16 2,406,876 2,078,776 1,400,227 Consignment sales - net Pendapatan jasa 35,232 26,504 14,699 Services fee

Pendapatan bersih 5,616,932 4,700,712 3,316,699 Net revenue

Beban pokok pendapatan 17 (1,910,789) (1,595,216) (1,173,423) Cost of revenue

Laba kotor 3,706,143 3,105,496 2,143,276 Gross profit

Beban penjualan 18 (1,049,593) (912,909) (627,520) Selling expenses General and administration Beban umum dan administrasi 19 (1,082,623) (937,439) (619,544) expenses Keuntungan/(kerugian) lainnya - bersih 20 10,424 (13,847) (203,296) Other gains/(losses) - net

(2,121,792) (1,864,195) (1,450,360)

Laba operasi 1,584,351 1,241,301 692,916 Operating profit

Penghasilan keuangan 26,151 31,066 21,227 Finance income Biaya keuangan (451,507) (536,773) (436,928) Finance cost

Biaya keuangan - bersih (425,356) (505,707) (415,701) Finance expense - net

Laba sebelum Profit before pajak penghasilan 1,158,995 735,594 277,215 income tax

Beban pajak penghasilan 11c (388,114) (269,946) (214,598) Income tax expense

Laba bersih 770,881 465,648 62,617 Net profit

Pendapatan/(rugi) Other comprehensive komprehensif lain income/(loss) Difference in value from Selisih nilai restructuring transactions transaksi restrukturisasi among entities under entitas sepengendali 2u,3 - - (3,767,126) common control Reversal of difference in value from restructuring Pembalikan selisih nilai transaksi transactions among restrukturisasi entitas entities under common sepengendali 2u, 20 - - 210,834 control

- - (3,556,292)

Comprehensive Pendapatan/(rugi) komprehensif 770,881 465,648 (3,493,675) income/(loss)

Laba bersih per Net earnings per saham dasar share basic dan dilusian (nilai penuh) 22 264 160 21 and diluted (full amount)

*) Menyajikan sembilan bulan hasil usaha Perusahaan sehingga *) Represents nine months of the Company's operating tidak dapat diperbandingkan dengan hasil usaha untuk tahun results, accordingly it is not comparable with the operating yang berakhir pada tanggal-tanggal 31 Desember 2012 dan 2011 results for the years ended 31 December 2012 and 2011 (lihat Catatan 3). (see Note 3).

Catatan atas laporan keuangan merupakan bagian yang tidak The accompanying notes form an integral part of terpisahkan dari laporan keuangan. these financial statements.

F-9 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 3/1 Schedule

LAPORAN PERUBAHAN EKUITAS STATEMENTS OF CHANGES IN EQUITY UNTUK TAHUN YANG BERAKHIR 31 DESEMBER 2012, 2011 DAN 2010 FOR THE YEARS ENDED 31 DECEMBER 2012, 2011 AND 2010 (Dinyatakan dalam jutaan Rupiah, kecuali dinyatakan lain) (Expressed in millions of Rupiah, unless otherwise stated)

Selisih nilai transaksi restrukturisasi entitas sepengendali/ Difference in value from restructuring Saldo laba/ Tambahan transactions (akumulasi kerugian)/ modal among Retained earnings/ Modal disetor/ entities (accumulated losses) saham/ Additional under Tidak Catatan/ Share paid in common Dicadangkan/ dicadangkan/ Jumlah/ Notes capital capital control Appropriated Unappropriated Total

Saldo 1 Januari 2010 386,794 195,192 (210,834)-(43,042)328,110 Balance at 1 January 2010

Laba bersih tahun berjalan* - - - - 62,617 62,617 Netprofitfortheyear* Rugi komprehensif lain - - (3,556,292)- - (3,556,292) Other comprehensive loss

Total rugi komprehensif selama Total comprehensive loss tahun berjalan - - (3,556,292) - 62,617 (3,493,675) for the year

Saldo 31 Desember 2010 386,794 195,192 (3,767,126)-19,575 (3,165,565) Balanceat31December2010

Saldo 1 Januari 2011 386,794 195,192 (3,767,126) - 19,575 (3,165,565) Balance at 1 January 2011

Laba bersih/pendapatan Net profit/comprehensive komprehensif tahun berjalan - - - - 465,648 465,648 income for the year

Pencadangan saldo laba 15 - - - 6,250 (6,250) - Appropriation of retained earnings

Dividen 15 - - - - (2,496)(2,496) Dividend

Saldo 31 Desember 2011 386,794 195,192 (3,767,126)6,250 476,477 (2,702,413) Balanceat31December2011

Catatan atas laporan keuangan merupakan bagian yang The accompanying notes form an integral part of

F-10 tidak terpisahkan dari laporan keuangan. these financial statements. PT MATAHARI DEPARTMENT STORE Tbk

Halaman 3/2 Schedule

Selisih nilai transaksi restrukturisasi entitas sepengendali/ Difference in value from restructuring Tambahan transactions modal among Saldo laba/ Modal disetor/ entities Retained earnings saham/ Additional under Tidak Catatan/ Share paid in common Dicadangkan/ dicadangkan/ Jumlah/ Notes capital capital control Appropriated Unappropriated Total

Saldo 1 Januari 2012 386,794 195,192 (3,767,126) 6,250 476,477 (2,702,413) Balance at 1 January 2012

Laba bersih/pendapatan Net profit/comprehensive komprehensif tahun berjalan - - - - 770,881 770,881 incomefortheyear

Pencadangan saldo laba 15 - - - 4,700 (4,700)-Appropriation of retained earnings

Saldo 31 Desember 2012 386,794 195,192 (3,767,126) 10,950 1,242,658 (1,931,532) Balanceat31December2012

Catatan atas laporan keuangan merupakan bagian yang The accompanying notes form an integral part of tidak terpisahkan dari laporan keuangan. these financial statements. F-11 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 4/1 Schedule

LAPORAN ARUS KAS STATEMENTS OF CASH FLOWS UNTUK TAHUN YANG BERAKHIR FOR THE YEARS ENDED 31 DESEMBER 2012, 2011 DAN 2010 31 DECEMBER 2012, 2011 AND 2010 (Dinyatakan dalam jutaan Rupiah, (Expressed in millions of Rupiah, kecuali dinyatakan lain) unless otherwise stated)

Catatan/ Notes 2012 2011 2010*

Arus kas dari aktivitas Cash flows from operating operasi activities Penerimaan dari pelanggan 11,975,982 10,025,226 6,886,475 Receipts from customers Pembayaran kepada pemasok (7,831,342) (6,511,193) (4,733,181) Payments to suppliers Pembayaran kepada karyawan Payments to employees dan lain-lain (2,255,168) (1,983,995) (771,838) and others

Cash generated from Kas yang dihasilkan dari operasi 1,889,472 1,530,038 1,381,456 operations

Penerimaan penghasilan bunga 26,151 31,066 21,227 Receipts of interest income Pembayaran pajak Payment of corporate penghasilan badan (315,842) (337,430) (118,994) income taxes

Arus kas bersih yang diperoleh Net cash flows provided dari aktivitas operasi 1,599,781 1,223,674 1,283,689 from operating activities

Arus kas dari aktivitas Cash flows from investing investasi activities Perolehan aset tetap (161,808) (139,926) (85,082) Acquisition of fixed assets Pembayaran uang muka Advance payment for pembelian aset tetap (79,295) (95,741) (27,257) purchase of fixed assets Penambahan uang muka sewa (272,761) (25,355) (15,165) Additional rental advances Proceeds from Hasil dari penjualan aset tetap 7 1,058 510 499 sale of fixed assets Pembelian saham Perusahaan Purchase of the dari pemegang saham Company’s shares from sebelumnya oleh the previous shareholders PT Meadow Indonesia - - (7,791,346) by PT Meadow Indonesia

Arus kas bersih yang digunakan Net cash flows used in untuk aktivitas investasi (512,806) (260,512) (7,918,351) investing activities

Arus kas dari aktivitas Cash flows from financing pendanaan activities Pembayaran pinjaman bank (616,931) (626,315) (162,500) Repayment of bank loans Pembayaran beban bunga dan Payment of interest and biaya bank (325,445) (413,574) (311,970) bank charges Pembayaran pinjaman Payment of loan from third pihak ketiga 23 (1,237,817) - - party Pembayaran dividen - (2,496) - Dividend payment Penerimaan pinjaman Proceeds from bank bank - bersih 1,176,173 - 3,108,893 loans - net Penerimaan pinjaman Proceeds from loan from pihak ketiga 23 - - 1,000,000 third party Penerimaan dari pemegang Proceeds from shareholders saham PT Meadow Indonesia - - 4,182,800 of PT Meadow Indonesia Pembayaran untuk pemegang Payment to shareholders saham PT Meadow Indonesia - - (147,235) of PT Meadow Indonesia

Arus kas bersih yang (digunakan Net cash flows (used in)/ untuk)/diperoleh dari provided from aktivitas pendanaan (1,004,020) (1,042,385) 7,669,988 financing activities

*) Menyajikan sembilan bulan arus kas Perusahaan sehingga *) Represents nine months of the Company's cash flows, tidak dapat diperbandingkan dengan arus kas untuk tahun accordingly it is not comparable with the cash flows yang berakhir pada tanggal-tanggal 31 Desember 2012 dan 2011 for the years ended 31 December 2012 and 2011 (lihat Catatan 3). (see Note 3).

Catatan atas laporan keuangan merupakan bagian yang tidak The accompanying notes form an integral part of terpisahkan dari laporan keuangan. these financial statements.

F-12 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 4/2 Schedule

Catatan/ Notes 2012 2011 2010*

Kenaikan/(penurunan) bersih Net increase/ (decrease) in kas dan setara kas 82,955 (79,223) 1,035,326 cash and cash equivalents

Cash and cash equivalents Kas dan setara kas pada at the beginning awal tahun 956,104 1,035,327 1 of the year

Total cash and cash Jumlah kas dan setara kas equivalents at the end pada akhir tahun 5 1,039,059 956,104 1,035,327 of the year

Kas dan setara kas yang Restricted cash and dibatasi penggunaannya 5 (39,187) (37,130) (36,087) cash equivalents

Kas dan setara kas pada Cash and cash equivalents akhir tahun 5 999,872 918,974 999,240 at the end of the year

Catatan atas laporan keuangan merupakan bagian yang tidak The accompanying notes form an integral part of terpisahkan dari laporan keuangan. these financial statements.

F-13 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 5/1 Schedule

CATATAN ATAS LAPORAN KEUANGAN NOTES TO THE FINANCIAL STATEMENTS 31 DESEMBER 2012, 2011 DAN 2010 31 DECEMBER 2012, 2011 AND 2010 (Dinyatakan dalam jutaan Rupiah, (Expressed in millions of Rupiah, kecuali dinyatakan lain) unless otherwise stated)

1. UMUM 1. GENERAL

a. Pendirian dan informasi umum a. Establishment and general information

PT Matahari Department Store Tbk PT Matahari Department Store Tbk (the (“Perusahaan”) didirikan dengan nama ”Company”) was established as PT Stephens Utama International Leasing PT Stephens Utama International Leasing Corp berdasarkan Akta Notaris Misahardi Corp, based on Notarial Deed No. 2 dated Wilamarta, S.H., No. 2 tanggal 1 April 1982. 1 April 1982, of Misahardi Wilamarta, S.H.. Akta pendirian ini telah disahkan oleh Menteri The deed of establishment was approved by Kehakiman Republik Indonesia dalam Surat the Minister of Justice of the Republic of Keputusan No. C2-2611-HT.01.01.TH.82 Indonesia in Decision Letter No. C2-2611- tanggal 18 November 1982 serta diumumkan HT.01.01.TH.82 dated 18 November 1982, dalam Berita Negara No. 4, Tambahan No. and was published in the State Gazette No. 58 tanggal 14 Januari 1983. 4 dated 14 January 1983 Supplement No. 58.

Perusahaan memulai kegiatan usaha The Company started its commercial komersialnya pada tahun 1982. Sejak operations in 1982. Since 30 October 2009, tanggal 30 Oktober 2009, Perusahaan the Company engaged in the retail business bergerak dalam usaha jaringan gerai serba for several types of products such as ada yang menyediakan berbagai macam clothes, accessories, bags, shoes, barang seperti pakaian, aksesoris, tas, cosmetics, and household appliances, and sepatu, kosmetik, dan peralatan rumah management consulting service. tangga serta jasa konsultan manajemen

Anggaran Dasar Perusahaan telah beberapa The Articles of Association of the Company kali mengalami perubahan, diantaranya have been amended from time to time, and sesuai dengan Akta Notaris Stephanie among others the amendment by Notarial Wilamarta, S.H., No. 61 tanggal 30 Oktober Deed No. 61 dated 30 October 2009 of 2009, antara lain mengenai: Stephanie Wilamarta, S.H. related to:

1. Perubahan dan penambahan maksud 1. Change and addition of the Company’s dan tujuan serta kegiatan usaha purpose, objective and business activity Perusahaan menjadi usaha di bidang to trading activity; perdagangan; 2. Perubahan nama Perusahaan menjadi 2. Change of the Company’s name to PT Matahari Department Store Tbk; dan PT Matahari Department Store Tbk; and 3. Perubahan susunan Dewan Direksi dan 3. Changes in the composition of the Dewan Komisaris Perusahaan. Company’s Board of Directors and Board of Commissioners.

F-14 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 5/2 Schedule

1. UMUM (lanjutan) 1. GENERAL (continued)

a. Pendirian dan informasi umum (lanjutan) a. Establishment and general information (continued)

Perubahan tersebut disetujui dalam Rapat This amendment was approved in the Umum Pemegang Saham Luar Biasa tanggal Extraordinary General Meeting of the 30 Oktober 2009. Perubahan ini telah Shareholders on 30 October 2009. This mendapatkan persetujuan Menteri Hukum amendment was approved by the Minister of dan Hak Asasi Manusia Republik Indonesia Law and Human Rights in Decision Letter dalam Surat Keputusan No. AHU- No. AHU-57063.AH.01.02 year 2009 dated 57063.AH.01.02 tahun 2009 tanggal 23 November 2009, and was registered in 23 November 2009 dan telah didaftarkan Company Register No. AHU- dalam Daftar Perusahaan No. AHU- 0077854.AH.01.09 year 2009 dated 0077854.AH.01.09 tahun 2009 tanggal 23 November 2009. 23 November 2009.

Perubahan terakhir dimuat dalam Akta No. The latest amendment was by Notarial Deed 55 tanggal 27 Juli 2012 yang dibuat di No. 55 dated 27 July 2012 of Ny. hadapan Ny. Poerbaningsih Adi Warsito, Poerbaningsih Adi Warsito, S.H. relating to S.H. mengenai perubahan komposisi Dewan the changes in the composition of Board of Komisaris dan Direksi Perusahaan. Commisioners and Directors of the Perubahan tersebut telah diterima oleh Company. This amendment was received by Kementerian Hukum dan Hak Asasi Manusia the Minister of Law and Human Rights, as Republik Indonesia sebagaimana dinyatakan stated also in the Receipt of Notification for dalam Surat Penerimaan Pemberitahuan Amendment of the Company’s Data of Perubahan Data Perseroan PT Matahari PT Matahari Department Store Tbk No. Department Store Tbk No. AHU-AH.01.10- AHU-AH.01.10-29626 dated 9 August 2012 29626 tanggal 9 Agustus 2012 dan telah and was registered in Company Register No. didaftarkan dalam Daftar Perusahaan No. AHU-0072998.AH.01.09 Year 2012, dated AHU-0072998.AH.01.09 Tahun 2012 tanggal 9 August 2012. 9 Agustus 2012.

Kantor pusat operasional Perusahaan The Company’s operational head office is berlokasi di Menara Matahari Lantai 15, located in Menara Matahari Lantai 15, Jl. Bulevar Palem Raya No. 7, Lippo Jl. Bulevar Palem Raya No. 7, Lippo Karawaci - Tangerang, Jawa Barat dan Karawaci - Tangerang, West Java, and it has memiliki gerai-gerai yang tersebar di kota- several stores that are located in major cities kota besar di Indonesia. Pada tanggal 31 throughout Indonesia. As at 31 December Desember 2012, Perusahaan 2012, the Company is operating 116 stores mengoperasikan 116 gerai (2011: 103 gerai (2011: 103 stores and 2010: 95 stores) - dan 2010: 95 gerai) - tidak diaudit. unaudited.

Entitas induk adalah Asia Color Company Ltd The parent of the Company is Asia Color dan entitas induk utama adalah Asia Color Company Ltd and the ultimate parent of the Holdings Limited, sebuah perusahaan yang Company is Asia Color Holdings Limited, a berdiri dan berkedudukan di Cayman Island. company which is incorporated and domiciled in Cayman Island.

F-15 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 5/3 Schedule

1. UMUM (lanjutan) 1. GENERAL (continued)

a. Pendirian dan informasi umum (lanjutan) a. Establishment and general information (continued)

Kegiatan Perusahaan yang mempengaruhi The Company’s corporate actions from the efek yang diterbitkan sejak tanggal date of its initial public offering up to penawaran umum perdana sampai dengan 31 December 2012 are as follows: tanggal 31 Desember 2012 adalah sebagai berikut:

Tambahan saham beredar setelah transaksi/ Additional shares issued after the Tindakan/Action Tahun/Year transaction

Penawaran umum perdana saham seri A dengan nilai nominal Rp 1.000 (nilai penuh)/ Initial public offering of type A shares with par value of Rp 1,000 (full amount) 1989 2,140,000 Pencatatan tambahan saham seri A dengan nilai nominal Rp 1.000 (nilai penuh)/ Additional registration of type A shares with par value of Rp 1,000 (full amount) 1990 2,250,000 Pembagian saham bonus seri A dengan nilai nominal Rp 1.000 (nilai penuh) dengan ketentuan setiap pemegang lima (5) saham lama berhak memperoleh satu (1) saham bonus/ Bonus stock of type A shares with par value of Rp 1,000 (full amount) with requisite of one (1) new share for every five (5) existing shares held 1990 878,000 Pembagian saham bonus seri A dengan nilai nominal Rp 1.000 (nilai penuh) dengan ketentuan setiap pemegang satu (1) saham lama berhak memperoleh dua (2) saham bonus/ Bonus stock of type A shares with par value of Rp 1,000 (full amount) with requisite of two (2) new shares for every one (1) existing share held 1992 10,536,000 Pembagian dividen saham seri A dengan ketentuan setiap pemegang lima (5) lembar saham lama berhak memperoleh satu (1) dividen saham/ Stock dividend of type A shares with requisite of one (1) new share for every five (5) existing shares held 1994 3,160,800 Pencatatan tambahan saham seri A dengan nilai nominal Rp 1.000 (nilai penuh)/ Additional registration of type A shares with par value of Rp 1,000 (full amount) 1997 11,880,000

F-16 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 5/4 Schedule

1. UMUM (lanjutan) 1. GENERAL (continued)

a. Pendirian dan informasi umum (lanjutan) a. Establishment and general information (continued)

Tambahan saham beredar setelah transaksi/ Additional shares issued after the Tindakan/Action Tahun/Year transaction Penggabungan jumlah saham seri A melalui peningkatan nilai nominal seri A dari Rp 1.000 (nilai penuh) menjadi Rp 5.000 (nilai penuh)/ Reverse stock split of type A shares by increasing Oktober/ par value from Rp 1,000 (full amount) October to Rp 5,000 (full amount) 2009 (24,675,840)

Jumlah saham seri A per 31 Desember 2012/ Total type A shares as at 31 December 2012 6,168,960

Penerbitan saham seri B dengan nilai nominal Rp 70 (nilai penuh) dengan ketentuan setiap pemegang 42 saham seri A berhak memperoleh satu (1) lembar saham seri B (Penawaran Umum Terbatas (“PUT”) I)/ Issuance of type B shares with par value Rp 70 (full amount) with requisite of one (1) type B share for every 42 Juli/July type A shares (Limited Public Offering (“LPO”) I) 2001 1,295,481,600 Penggabungan jumlah saham seri B melalui peningkatan nilai nominal seri B dari Rp 70 (nilai penuh) menjadi Rp 350 (nilai penuh)/ Oktober/ Reverse stock split of type B shares by increasing October par value from Rp 70 (full amount) to Rp 350 (full amount) 2009 (1,036,385,280) Jumlah saham seri B per 31 Desember 2012/ Total type B shares as at 31 December 2012 259,096,320

Penerbitan saham seri C dengan nilai nominal Rp 100 (nilai penuh) (PUT II)/ Oktober/ Issuance of type C shares with par value of Rp 100 October (full amount) (LPO II) 2009 2,652,652,800

Jumlah saham seri C per 31 Desember 2012 / Total type C shares as at 31 December 2012 2,652,652,800

F-17 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 5/5 Schedule

1. UMUM (lanjutan) 1. GENERAL (continued)

a. Pendirian dan informasi umum (lanjutan) a. Establishment and general information (continued) Susunan Dewan Komisaris dan Direksi The compositions of the Company’s Board of Perusahaan adalah sebagai berikut: Commissioners and Directors were as follows:

2012 2011 2010 Board of Dewan Komisaris Commissioners Presiden John Bellis John Bellis John Bellis President Komisaris Commissioner

Komisaris Jonathan L. Parapak Jonathan L. Parapak Jonathan L. Parapak Independent Independen Wiliam Travis Saucer - - Commissioner

Komisaris Roy Kuan Roy Kuan Roy Kuan Commissioners Rene Mang Wing Ming Rene Mang Wing Ming Rene Mang Wing Ming Henry Jany Liando Henry Jany Liando Henry Jany Liando Artapong Porndhiti Artapong Porndhiti Allen Han Jing Choung

Board of Dewan Direksi Directors Presiden Bunjamin J. Mailool Bunjamin J. Mailool Bunjamin J. Mailool President Direktur Director

Wakil Presiden Larry Michael Remsen William Travis Saucer William Travis Saucer Vice President Direktur Director

Direktur Sigit Prasetya Sigit Prasetya Sigit Prasetya Directors Wai Hoong Fock Wai Hoong Fock Wai Hoong Fock Joo Suk Kim Joo Suk Kim Joo Suk Kim Andre Rumantir R. Soeparmadi R. Soeparmadi

b. Penggabungan usaha dengan PT Meadow b. Merger with PT Meadow Indonesia Indonesia

Berdasarkan rapat umum pemegang saham Based on the extraordinary shareholders’ luar biasa pada tanggal 20 September 2011 general meeting dated 20 September 2011 yang diaktakan dengan Akta Notaris which was notarised by Notarial Deed No.32 Ny. Poerbaningsih Adi Warsito No. 32 Ny. Poerbaningsih Adi Warsito dated tanggal 20 September 2011 dan telah 20 September 2011 and was received by the diterima oleh Menteri Hukum dan Hak Asasi Minister of Law and Human Rights in the Manusia Republik Indonesia dalam Surat Receipt of Notification for Merger of PT Penerimaan Pemberitahuan Penggabungan Matahari Department Store Tbk No. AHU- PT Matahari Department Store Tbk No. AHU- AH.01.10-30555 dated 26 September 2011 AH.01.10-30555 tanggal 26 September 2011 and was registered in Company Register No. dan telah didaftarkan dalam Daftar AHU-0077329.AH.01.09 Year 2011 dated 26 Perusahaan No. AHU-0077329.AH.01.09 September 2011 and Correction of Receipt of Tahun 2011 tanggal 26 September 2011 dan Notification for Merger of PT Matahari Perbaikan Surat Penerimaan Pemberitahuan Department Store Tbk No. AHU.2-AH.01.01- Penggabungan PT Matahari Department 341 dated 13 January 2012, the Company’s Store Tbk No. AHU.2-AH.01.01-341 tanggal shareholders who do not have a conflict of 13 Januari 2012, pemegang saham interest (independent) by majority approved Perusahaan yang tidak mempunyai benturan the following matters: kepentingan (independen) dengan suara mayoritas menyetujui antara lain hal-hal sebagai berikut:

F-18 PT MATAHARI DEPARTMENT STORE Tbk

Halaman 5/6 Schedule

1. UMUM (lanjutan) 1. GENERAL (continued)

b. Penggabungan usaha dengan PT Meadow b. Merger with PT Meadow Indonesia Indonesia (lanjutan) (continued)

- Menyetujui penggabungan Perusahaan - To approve the Company’s merger with dengan entitas induk Perusahaan its parent company (PT Meadow (PT Meadow Indonesia), yang berlaku Indonesia), which was effective from efektif sejak tanggal 30 September 2011. 30 September 2011.

- Menyetujui Rancangan Penggabungan - To approve the Merger Plan of the Perusahaan dengan PT Meadow Company with PT Meadow Indonesia. Indonesia.

- Menyetujui Konsep Akta Penggabungan - To approve the Concept of Merger Deed Perusahaan dengan PT Meadow of the Company with PT Meadow Indonesia. Indonesia.

- Mengubah jenis Perusahaan dari Non - To change the type of the Company from Fasilitas Umum menjadi Fasilitas a Non-Public Facilities Company to a Penanaman Modal Asing (PMA). Foreign Investment Facilities Company (PMA).

- Menetapkan susunan pemegang saham - To determine the new shareholders Perusahaan yang baru. composition.

Keputusan pemegang saham independen The decisions of the independent didukung oleh pemegang saham yang shareholders are supported by shareholders mempunyai benturan kepentingan who have a conflict of interest (dependent). (dependen).

Perubahan jenis Perusahaan dari Non The changes in the type of the Company Fasilitas Umum menjadi PMA juga telah from a Non-Public Facilities Company to disetujui oleh Badan Koordinasi Penanaman PMA has also been approved by the Modal (“BKPM”) berdasarkan Surat Investment Coordinating Board ("BKPM") Keputusan Kepala BKPM No. 9/1/IU/IV/PMA/ based on Head of BKPM Decision Letter No. PERDAGANGAN/2011 tanggal 20 Oktober 9/1/IU/IV/PMA/PERDAGANGAN/2011 dated 2011 tentang izin usaha penggabungan 20 October 2011 about the business license perusahaan penanaman modal. of merger capital investment company.

Pada tanggal 28 Desember 2011, On 28 December 2011, the Company Perusahaan mengajukan permohonan submitted a tax neutral merger application to penggabungan usaha yang memenuhi syarat the Directorate General of Taxes (“DGT”). pajak kepada Direktorat Jenderal Pajak The proposal was approved on 11 May 2012. (“DJP”). Permohonan ini disetujui pada tanggal 11 Mei 2012.

Sebagai hasil penggabungan, maka pada As a result of the merger, as from the tanggal efektif penggabungan usaha effective date of the merger, the legal entity tersebut, badan hukum PT Meadow of PT Meadow Indonesia is dissolved by law Indonesia bubar demi hukum dan seluruh and all assets and liabilities of PT Meadow aset dan liabilitas PT Meadow Indonesia Indonesia are transferred to the Company beralih kepada Perusahaan (lihat Catatan 3). (see Note 3).

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Laporan keuangan Perusahaan disusun oleh The Company’s financial statements were Dewan Direksi dan diselesaikan pada tanggal 9 prepared by the Board of Directors and Februari 2013. completed on 9 February 2013.

Laporan keuangan telah disusun sesuai dengan The financial statements have been prepared in Standar Akuntansi Keuangan di Indonesia. accordance with the Indonesian Financial Accounting Standards.

Berikut ini adalah ikhtisar kebijakan akuntansi Presented below is the summary of the penting yang diterapkan dalam penyusunan significant accounting policies adopted for the laporan keuangan Perusahaan yang sesuai preparation of the financial statements of the dengan Standar Akuntansi Keuangan di Company, which conform to the Indonesian Indonesia dan peraturan yang ditetapkan oleh Financial Accounting Standards and the Badan Pengawas Pasar Modal dan Lembaga regulations imposed by the Indonesian Capital Keuangan Indonesia (BAPEPAM-LK) No. VIII.G.7 Market and Financial Institution Supervisory dan Keputusan No. KEP-347/BL/2012 tentang Agency (BAPEPAM-LK) No. VIII.G.7 and Decree Penyajian dan Pengungkapan Laporan No. KEP-347/BL/2012 regarding the Financial Keuangan Emiten atau Perusahaan Publik. Statements Presentation and Disclosure for Public Company.

a. Dasar penyusunan laporan keuangan a. Basis of preparation of the financial statements

Laporan keuangan disusun berdasarkan The financial statements have been prepared konsep harga perolehan yang dimodifikasi on the historical cost concept as modified by dengan aset dan liabilitas keuangan the financial assets and financial liabilities (termasuk instrumen derivatif) pada nilai (including derivative instruments) at fair value wajar melalui laba rugi, dan menggunakan through profit or loss, and using the accrual dasar akrual, kecuali untuk laporan arus kas. basis, except for the statements of cash flows.

Laporan arus kas disusun menggunakan The statements of cash flows were prepared metode langsung dengan mengelompokkan using the direct method by classifying cash arus kas atas dasar kegiatan operasi, flows on the basis of operating, investing and investasi dan pendanaan. financing activities.

Estimasi dan pertimbangan akuntansi yang Significant accounting estimate and signifikan yang diterapkan dalam judgement applied in the preparation of these penyusunan laporan keuangan Perusahaan financial statements are disclosed in Note 4. diungkapkan pada Catatan 4.

Angka di dalam laporan keuangan Figures in the financial statements are dibulatkan dan dinyatakan dalam jutaan rounded to and expressed in millions of Rupiah kecuali dinyatakan lain. Rupiah unless otherwise stated.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued) a. Dasar penyusunan laporan keuangan a. Basis of preparation of the financial (lanjutan) statements (continued) Perubahan pada pernyataan standar Changes to the statement of financial akuntansi keuangan dan interpretasi accounting standards and interpretation pernyataan standar akuntansi keuangan to statement of financial accounting standards Pada tanggal 1 Januari 2012, Perusahaan On 1 January 2012, the Company adopted menerapkan pernyataan standar akuntansi new and revised statements of financial keuangan (“PSAK”) dan interpretasi standar accounting standards (“SFAS”) and akuntansi keuangan (“ISAK”) baru dan revisi interpretations of statements of financial yang efektif sejak tanggal tersebut. accounting standards (“ISFAS”) that are Perubahan kebijakan akuntansi Perusahaan mandatory for application from that date. telah dibuat seperti yang disyaratkan, sesuai Changes to the Company’s accounting dengan ketentuan transisi dalam masing- policies have been made as required, in masing standar dan interpretasi. accordance with the transitional provisions in the respective standards and interpretations. Penerapan standar dan interpretasi baru The adoption of the following new or revised atau revisi, yang relevan dengan operasi standards and interpretations, which are Perusahaan dan memberikan dampak pada relevant to the Company’s operations and laporan keuangan, adalah sebagai berikut. resulted in an effect on the financial statements is as follows: PSAK No. 24: “Imbalan Kerja” SFAS No. 24: “Employee Benefits” Standar yang direvisi ini memperkenalkan The revised standard introduces a new alternatif metode baru untuk mengakui alternative method to recognise actuarial keuntungan/(kerugian) aktuarial, yaitu gains/(losses), that is to recognise all dengan mengakui seluruh actuarial gains/(losses) in full through other keuntungan/(kerugian) melalui pendapatan comprehensive income. komprehensif lainnya. Perusahaan telah memilih untuk tetap The Company elected to continue to use the menggunakan pendekatan koridor dalam corridor approach in the recognition of pengakuan keuntungan/(kerugian) aktuarial. actuarial gains/(losses). Standar yang direvisi juga mensyaratkan The revised standard also introduces pengungkapan baru tambahan. additional new disclosures. The new Pengungkapan yang disyaratkan tersebut disclosure requirements as disclosed in Note telah diungkapkan dalam Catatan 21 yang 21 have been prepared in accordance with telah disusun sesuai dengan standar. the standard. PSAK No. 60: “Instrumen Keuangan: SFAS No. 60: “Financial Instrument: Pengungkapan” Disclosures” Perusahaan menerapkan PSAK No. 60: The Company adopts SFAS No. 60: ”Instrumen Keuangan: Pengungkapan”, yang ”Financial Instruments: Disclosures”, which is wajib diterapkan untuk pertama kali untuk mandatory for the first time for the financial tahun buku yang dimulai pada tanggal year beginning on 1 January 2012. 1 Januari 2012. PSAK No. 60 mengungkapkan tiga tingkat SFAS No. 60 introduces three hierarchy level hirarki pengungkapan nilai wajar dan for fair value measurement disclosure and mengharuskan entitas untuk menyediakan require entities to provide additional pengungkapan tambahan mengenai disclosure about the relative reliability of fair keandalan pengukuran nilai wajar. Sebagai value measurements. In addition, the tambahan, standar ini menjelaskan standard clarify the requirement for the keharusan atas pengungkapan risiko disclosure of liquidity risk. likuiditas.

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Standar revisi yang wajib diterapkan untuk Revised standard which is mandatory for periode pelaporan keuangan yang dimulai financial reporting period beginning on 1 Januari 2013 dan relevan dengan operasi 1 January 2013 and relevant to the Perusahaan adalah sebagai berikut: Company’s operations is as follows:

PSAK No. 38 (Revisi 2012): “Kombinasi SFAS No. 38 (Revised 2012): “Business Bisnis pada Entitas Sepengendali”. Combination on Entities under Common Control”.

Standar ini diterapkan secara prospektif This standard shall be applied prospectively dengan ketentuan bahwa saldo selisih nilai with the requirement that the beginning transaksi restrukturisasi entitas sepengendali balance of difference in value from berdasarkan PSAK 38 (2004): Akuntansi restructuring transactions among entities Restrukturisasi Entitas Sepengendali pada under common control based on SFAS 38 tanggal awal penerapan (1 Januari 2013) (2004): Accounting for Restructuring disajikan di ekuitas dalam pos tambahan Transactions of Entities Under Common modal disetor dan selanjutnya tidak dapat Control at the first implementation (1 January diakui sebagai laba rugi direalisasi maupun 2013) is presented in the equity as part of direklasifikasi ke saldo laba. additional paid in capital and will not be recognised as realised gain/loss or reclassified into retained earnings.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

b. Penjabaran mata uang asing b. Foreign currency translation

Transaksi dalam mata uang asing dijabarkan Foreign currency transactions are translated ke dalam mata uang Rupiah dengan into Rupiah using the exchange rates menggunakan kurs yang berlaku pada prevailing at the dates of the transactions. tanggal transaksi.

Laporan keuangan disajikan dalam Rupiah The financial statements are presented in yang merupakan mata uang fungsional dan Rupiah, which is the functional and penyajian Perusahaan. presentation currency of the Company.

Aset dan liabilitas moneter dalam mata uang Foreign currency monetary assets and asing dijabarkan ke dalam mata uang Rupiah liabilities are translated into Rupiah at the dengan menggunakan kurs yang berlaku rates of exchange prevailing at the pada tanggal laporan posisi keuangan. statements of financial position date.

Keuntungan dan kerugian selisih kurs yang Foreign exchange gains and losses resulting timbul dari penyelesaian transaksi dalam from the settlement of foreign currency mata uang asing dan dari penjabaran aset transactions and from the translation of dan liabilitas moneter dalam mata uang asing monetary assets and liabilities denominated diakui di dalam laporan laba rugi in foreign currency are recognised in the komprehensif. statements of comprehensive income.

c. Transaksi dengan pihak-pihak berelasi c. Related parties transactions

Perusahaan mempunyai transaksi dengan The Company has transactions with related pihak-pihak berelasi. Definisi pihak-pihak parties. The definition of related parties used berelasi yang dipakai adalah definisi yang is in accordance with SFAS No. 7 (Revised diatur dalam PSAK No. 7 (Revisi 2010) 2010) “Related Party Disclosures”. “Pengungkapan Pihak-pihak Berelasi”.

d. Instrumen keuangan disalinghapus d. Offsetting financial instruments

Aset keuangan dan liabilitas keuangan Financial assets and liabilities are offset and disalinghapus dan jumlah netonya dilaporkan the net amount is reported in the statements pada laporan posisi keuangan ketika of financial position when there is a legally terdapat hak yang berkekuatan hukum untuk enforceable right to offset the recognised melakukan saling hapus atas jumlah yang amounts and there is an intention to settle telah diakui tersebut dan adanya niat untuk on a net basis, or realise the asset and settle menyelesaikan secara neto, atau untuk the liability simultaneously. merealisasikan aset dan menyelesaikan liabilitas secara bersamaan.

e. Kas dan setara kas e. Cash and cash equivalents

Kas dan setara kas mencakup kas, Cash and cash equivalents include cash on simpanan pada bank yang sewaktu-waktu hand, deposits held at call with banks and bisa dicairkan dan investasi likuid jangka other short-term highly liquid investments pendek lainnya dengan jangka waktu jatuh with original maturities of three months or tempo tiga bulan atau kurang. less.

Kas dan setara kas yang dibatasi Cash and cash equivalents which are penggunaannya, disajikan sebagai “kas dan restricted in use, are presented as “restricted setara kas yang dibatasi penggunaannya” cash and cash equivalents” in the non- pada aset tidak lancar. current assets.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

f. Piutang usaha dan piutang lain-lain f. Trade and other receivables

Piutang usaha dan piutang lain-lain pada Trade and other receivables are recognised awalnya diakui sebesar nilai wajar dan initially at fair value and subsequently selanjutnya diukur pada biaya perolehan measured at amortised cost using the diamortisasi dengan menggunakan metode effective interest method, except where the bunga efektif, kecuali efek diskontonya tidak effect of discounting would be immaterial, material, setelah dikurangi provisi untuk less provision for receivable impairment. penurunan nilai piutang.

Provisi untuk penurunan nilai piutang Provision for receivable impairment is dibentuk pada saat terdapat bukti obyektif established when there is objective evidence bahwa saldo piutang tidak dapat ditagih. that the outstanding amounts will not be Piutang ragu-ragu dihapuskan pada saat collected. Doubtful accounts are written-off piutang tersebut tidak tertagih. during the period in which they are determined to be not collectible.

g. Persediaan g. Inventories

Persediaan dinyatakan pada nilai yang lebih Inventories are stated at the lower of cost or rendah antara harga perolehan dan nilai net realisable value. Cost is determined realisasi bersih. Harga perolehan ditentukan using the retail method. dengan menggunakan metode eceran.

Nilai realisasi bersih adalah estimasi harga Net realisable value is the estimate of the penjualan dalam kegiatan usaha normal selling price in the ordinary course of dikurangi estimasi beban penjualan. business, less the estimated selling expenses.

Persediaan Perusahaan tidak termasuk The Company’s inventories exclude persediaan konsinyasi. consignment stocks.

Risiko kehilangan persediaan ditentukan Risk from inventory loss was estimated berdasarkan estimasi dari pengalaman based on past experience and adjusted after sebelumnya dan disesuaikan kembali pada a physical count of inventories. Cost from tanggal perhitungan fisik persediaan. Beban inventory loss was recorded as a current kehilangan persediaan dicatat sebagai beban period cost of revenue. pokok pendapatan pada periode berjalan.

h. Biaya dibayar dimuka h. Prepaid expenses

Biaya dibayar dimuka diamortisasi dengan Prepaid expenses are amortised using menggunakan metode garis lurus selama the straight-line method over the period of periode manfaat yang diharapkan. expected benefit.

i. Sewa operasi i. Operating leases

Sewa yang risiko dan manfaat Leases under which all the risks and benefits kepemilikannya ada di pihak yang of ownership are effectively retained by the menyewakan diperlakukan sebagai transaksi lessor are classified as operating leases. sewa-menyewa biasa (operating leases). Operating lease payments are recorded as Pembayaran sewa-menyewa biasa dicatat an expense based on an allocation method sebagai beban berdasarkan metode alokasi that reflects the time pattern of benefits yang mencerminkan pola waktu dari manfaat enjoyed by the Company. yang dinikmati Perusahaan.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued) j. Aset tetap j. Fixed assets

Aset tetap diakui sebesar harga perolehan Fixed assets are stated at cost less dikurangi dengan akumulasi penyusutan. accumulated depreciation. Cost includes Harga perolehan mencakup semua expenditures that is directly attributable to the pengeluaran yang terkait secara langsung acquisition of the asset. dengan perolehan aset tetap tersebut.

Penyusutan aset tetap untuk Depreciation on fixed assets is calculated to mengalokasikan biaya perolehan hingga allocate their cost to their residual values mencapai nilai sisa sepanjang estimasi masa over their estimated useful lives, as follows: manfaatnya sebagai berikut:

Metode/Method Tahun/Years Garis lurus/ Renovasi bangunan Straight-line 5 Building renovation Saldo-menurun ganda/ Peralatan dan instalasi Double declining 8-14 Equipment and installation Saldo-menurun ganda/ Kendaraan Double declining 4 Vehicles Nilai residu dan masa manfaat aset ditelaah, The assets’ residual values and useful lives dan jika perlu disesuaikan, pada setiap are reviewed, and adjusted if appropriate, at tanggal laporan posisi keuangan. each statements of financial position date. Biaya-biaya setelah pengakuan awal aset Subsequent costs are included in the asset’s diakui sebagai bagian dari nilai tercatat aset carrying amount or recognised as a separate atau sebagai aset yang terpisah, asset, as appropriate, only when it is sebagaimana mestinya, hanya apabila probable that future economic benefits kemungkinan besar Perusahaan akan associated with the asset will flow to the mendapatkan manfaat ekonomis masa Company and the cost of the item can be depan berkenaan dengan aset tersebut dan measured reliably. The carrying amount of biaya perolehan aset dapat diukur dengan the replaced part is derecognised. All other andal. Nilai tercatat komponen yang diganti repairs and maintenance are charged to tidak lagi diakui. Semua perbaikan dan statements of comprehensive income during pemeliharaan lainnya dibebankan ke dalam the financial period in which they are laporan laba rugi komprehensif selama incurred. periode dimana perbaikan dan pemeliharaan tersebut terjadi.

Apabila aset tetap tidak digunakan lagi atau When fixed assets are retired or disposed of, dijual, maka nilai tercatat dan akumulasi their carrying values and the related penyusutannya dikeluarkan dari laporan accumulated depreciation are eliminated keuangan dan keuntungan atau kerugian from the financial statements and the yang dihasilkan atas pelepasan aset tetap resulting gain or loss on the disposal of fixed diakui dalam laporan laba rugi komprehensif. assets is recognised in the statements of comprehensive income. Aset dalam pembangunan dinyatakan Assets under construction are stated at sebesar biaya perolehan dan disajikan historical cost and presented as part of fixed sebagai bagian dari aset tetap. Akumulasi assets. The accumulated costs will be biaya perolehan akan dipindahkan ke reclassified to the appropriate fixed assets masing-masing akun aset tetap yang account when construction is completed and bersangkutan pada saat aset tersebut the asset is ready for its intended use. selesai dikerjakan dan siap digunakan. Depreciation is charged from the date when Penyusutan mulai dibebankan pada saat the assets are ready for use. aset tersebut siap digunakan.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

k. Penurunan nilai aset tetap dan aset tidak k. Impairment of fixed assets and other non- lancar lainnya current assets

Aset tetap dan aset tidak lancar lainnya Fixed assets and other non-current assets ditelaah untuk mengetahui apakah telah are reviewed for impairment whenever terjadi penurunan nilai bilamana terdapat events or changes in circumstances indicate kejadian atau perubahan keadaan yang that the carrying amount may not be mengindikasikan bahwa nilai tercatat aset recoverable. An impairment loss is tersebut tidak dapat diperoleh kembali. recognised for the amount by which the Kerugian akibat penurunan nilai diakui carrying amount of the asset exceeds its sebesar selisih antara nilai tercatat aset recoverable amount. The recoverable dengan nilai yang dapat diperoleh kembali amount is the higher of an asset’s fair value dari aset tersebut. Nilai yang dapat diperoleh less cost to sell and value in use. For the kembali adalah nilai yang lebih tinggi antara purposes of assessing impairment, assets nilai wajar dikurangi beban penjualan dengan are grouped at the lowest levels for which nilai pakai aset. Dalam rangka mengukur there are separately identifiable cash flows. penurunan nilai, aset dikelompokkan hingga unit terkecil yang menghasilkan arus kas terpisah.

l. Utang usaha l. Trade payables

Utang usaha adalah kewajiban membayar Trade payables are obligations to pay for barang atau jasa yang telah diterima dalam goods or services that have been acquired in kegiatan usaha normal dari pemasok. Utang the ordinary course of business from usaha diklasifikasikan sebagai liabilitas suppliers. Accounts payable are classified as jangka pendek jika pembayarannya jatuh current liabilities if payment is due within one tempo dalam waktu satu tahun atau kurang year or less (or in the normal operating cycle (atau dalam siklus operasi normal, jika lebih of the business if longer). If not, they are lama). Jika tidak, utang tersebut disajikan presented as non-current liabilities. sebagai liabilitas jangka panjang.

Utang usaha pada awalnya diakui sebesar Trade payables are initially measured at fair nilai wajar dan selanjutnya diukur pada biaya value and subsequently measured at perolehan diamortisasi dengan amortised cost using the effective interest menggunakan metode suku bunga efektif, method, except where the effect of kecuali jika efek diskontonya tidak material. discounting would be immaterial.

m. Provisi m. Provisions

Provisi diakui apabila Perusahaan Provisions are recognised when the mempunyai kewajiban kini (baik bersifat Company has a present obligation (legal as hukum maupun konstruktif) sebagai akibat well as constructive) as a result of past peristiwa masa lalu dan besar kemungkinan events and when it is probable that an penyelesaian kewajiban tersebut outflow of resources embodying economic mengakibatkan arus keluar sumber daya dan benefits will be required to settle the kewajiban tersebut dapat diestimasi dengan obligation and a reliable estimate of the andal. amount of the obligation can be made.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

n. Penghasilan tangguhan n. Deferred income

Penghasilan yang diterima dimuka berkaitan Income received in advance in relation to dengan poin loyalitas dan kupon belanja loyalty point and shopping voucher is diakui sebagai liabilitas dalam laporan posisi recorded as a liability in the statements of keuangan dan dikreditkan ke laporan laba financial position and credited to the rugi komprehensif berdasarkan estimasi statements of comprehensive income based tingkat pertukaran konversi atas poin dan on estimated redemption rates of the point penggunaan kupon tersebut. and coupon usage. o. Pinjaman o. Borrowings

Pada saat pengakuan awal, pinjaman diakui Borrowings are initially recognised at fair sebesar nilai wajar, dikurangi dengan biaya- value, net of transaction costs incurred. biaya transaksi yang terjadi. Selanjutnya, Subsequently, borrowings are stated at pinjaman diukur pada biaya perolehan amortised cost using the effective interest diamortisasi dengan menggunakan metode method. suku bunga efektif.

Pinjaman diklasifikasikan sebagai liabilitas Borrowings are classified under non-current jangka panjang kecuali yang akan jatuh liabilities unless their maturities are within tempo dalam waktu 12 bulan setelah tanggal 12 months after the statements of financial laporan posisi keuangan. position date.

Beban yang dibayarkan pada saat fasilitas Fees paid on the establishment of loan pinjaman diterima diakui sebagai biaya facilities are recognised as transaction costs transaksi pinjaman apabila besar of the loan to the extent that it is probable kemungkinan bahwa sebagian atau seluruh that some or all of the facility will be drawn fasilitas akan ditarik. Dalam hal ini, beban down. In this case, the fee is deferred until ditangguhkan sampai dengan penarikan the draw-down occurs. To the extent there is terjadi. Sejauh tidak ada bukti bahwa besar no evidence that it is probable that some or kemungkinan beberapa atau semua fasilitas all of the facility will be drawn down, the fee akan ditarik, beban tersebut dikapitalisasi is capitalised as a prepayment for liquidity sebagai pembayaran di muka untuk jasa services and amortised over the period of the likuiditas dan diamortisasi selama jangka facility to which it relates. waktu fasilitas tersebut.

p. Imbalan kerja p. Employee benefits

Imbalan kerja jangka pendek Short-term employee benefits

Imbalan kerja jangka pendek diakui pada Short-term employee benefits are recognised saat terutang kepada karyawan. when they accrue to the employees.

Imbalan kerja jangka pendek termasuk upah, Short-term employee benefits include wages, gaji, bonus dan insentif. salaries, bonus and incentives.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

p. Imbalan kerja (lanjutan) p. Employee benefits (continued)

Imbalan pensiun Retirement benefits

Imbalan pensiun dihitung berdasarkan Retirement benefits are calculated based on kewajiban yang diberikan berdasarkan benefits obligations provided under the Peraturan Perusahaan dan Undang-Undang Company Regulation and Labour Law No. Ketenagakerjaan No. 13/2003. 13/2003.

Kewajiban imbalan kerja yang diakui pada Theemployeebenefitsobligations laporan posisi keuangan sehubungan recognised in the statements of financial dengan imbalan pensiun merupakan nilai kini position in respect to retirement benefits are kewajiban imbalan pasti pada tanggal the present value of the defined benefit laporan posisi keuangan dan penyesuaian obligation at the statements of financial atas keuntungan atau kerugian aktuarial dan position date, and adjusted by unrecognised beban jasa lalu yang belum diakui. actuarial gains or losses and unrecognised Kewajiban imbalan pensiun dihitung oleh past service costs. The defined benefit aktuaris independen dengan menggunakan obligation is calculated by independent metode projected unit credit. actuaries using the projected unit credit method.

Nilai kini kewajiban imbalan pasti ditentukan The present value of the defined benefit dengan mendiskontokan estimasi arus kas obligation is determined by discounting the masa depan dengan menggunakan tingkat estimated future cash outflows using interest bunga obligasi pemerintah jangka panjang rates at the statements of financial position pada tanggal laporan posisi keuangan dalam date of long term government bonds that are mata uang Rupiah, sesuai dengan mata denominated in Rupiah, in which the benefits uang di mana imbalan tersebut akan will be paid, and that have terms to maturity dibayarkan, dan yang memiliki jangka waktu similar to the related retirement benefits yang sama dengan liabilitas imbalan pensiun liability. yang bersangkutan.

Biaya jasa lalu diakui secara langsung di Past-service costs are recognised in laporan laba rugi komprehensif, kecuali statements of comprehensive income, unless perubahan terhadap program pensiun the changes to the retirement plan are tersebut mensyaratkan karyawan tersebut conditional on the employees remaining in untuk bekerja selama periode waktu tertentu. service for a specified period of time. In this Dalam hal ini, biaya jasa lalu akan case, the past-service costs are amortised on diamortisasi secara garis lurus sepanjang a straight-line basis over that period. periode tersebut.

Keuntungan dan kerugian aktuarial yang Actuarial gains and losses arising from timbul dari penyesuaian dan perubahan experience adjustments and changes in dalam asumsi-asumsi aktuarial yang actuarial assumptions in excess of the 10% jumlahnya melebihi 10% dari nilai kini of the present value of the defined benefit kewajiban imbalan pasti, dibebankan atau obligations are charged or credited to dikreditkan ke laporan laba rugi statements of comprehensive income over komprehensif selama rata-rata sisa masa the employees’ expected average remaining kerja yang diharapkan dari karyawan working lives. tersebut.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

q. Perpajakan q. Taxation

Beban pajak suatu periode terdiri dari pajak The tax expense for the period comprises kini dan pajak tangguhan. Pajak tersebut current and deferred tax. Tax is recognised in diakui dalam laporan laba rugi komprehensif, the statements of comprehensive income, kecuali untuk pajak penghasilan yang except to the extent that it relates to items berasal dari transaksi atau kejadian yang recognised directly in equity. In this case, the langsung diakui ke ekuitas. Dalam hal ini, taxisrecognisedinequity. pajak penghasilan diakui dalam ekuitas.

Beban pajak kini dihitung berdasarkan The current income tax charge is calculated peraturan perpajakan yang berlaku pada on the basis of the tax laws enacted at the tanggal pelaporan keuangan. reporting date.

Pajak penghasilan tangguhan diakui dengan Deferred income tax is provided using the menggunakan metode balance sheet liability, balance sheet liability method, for all untuk semua perbedaan temporer antara temporary differences arising between the dasar pengenaan pajak atas aset dan tax bases of assets and liabilities and their liabilitas dengan nilai tercatatnya pada carrying values in the financial statements. laporan keuangan.

Pajak penghasilan tangguhan ditentukan Deferred income tax is determined using tax dengan menggunakan tarif pajak yang telah rates that have been enacted or substantially diberlakukan atau secara substansi telah enacted as at the statements of financial diberlakukan pada tanggal laporan posisi position date and are expected to apply when keuangan dan diharapkan berlaku pada saat the related deferred tax asset is realised or aset pajak tangguhan direalisasi atau the deferred tax liability is settled. liabilitas pajak tangguhan diselesaikan.

Aset pajak tangguhan diakui apabila besar Deferred tax assets are recognised to the kemungkinan jumlah penghasilan kena pajak extent that it is probable that future taxable di masa depan akan memadai untuk profit will be available against which the dikompensasi dengan perbedaan temporer deductible temporary differences can be yang masih dapat dimanfaatkan. utilised.

Manajemen secara periodik mengevaluasi Management periodically evaluates positions posisi yang dilaporkan di Surat taken in tax returns with respect to situations Pemberitahuan Tahunan (SPT) sehubungan in which applicable tax regulation is subject dengan situasi di mana aturan pajak yang to interpretation. It establishes provision berlaku membutuhkan interpretasi. Jika where appropriate on the basis of amounts perlu, manajemen menentukan provisi expected to be paid to the tax authorities. berdasarkan jumlah yang diharapkan akan dibayar kepada otoritas pajak.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

r. Pengakuan pendapatan dan beban r. Revenue and expenses recognition

Penjualan eceran merupakan pendapatan Retail sales represent net revenues earned bersih yang diperoleh dari penjualan barang from the sale of trading products. The net dagangan. Pendapatan bersih adalah revenues are net of sales discounts and penjualan setelah dikurangi potongan value added tax. penjualan dan pajak pertambahan nilai.

Pendapatan penjualan barang diakui pada Revenue from sales of goods is recognised saat penyerahan barang dagangan kepada when goods are delivered to customers. pelanggan.

Pendapatan dari penjualan konsinyasi Revenues from consignment sales are dibukukan sebesar jumlah penjualan barang recorded at the amount of sales of consigned konsinyasi kepada pelanggan dikurangi goods to customers less amounts payable to jumlah yang terutang kepada pemilik consignors. (consignors).

Pendapatan jasa diakui pada saat jasa Services fee is recognised when services are diberikan selama jumlah tersebut dapat performed, provided that the amount can be diukur dengan andal. measured reliably.

Beban diakui pada saat terjadinya Expenses are recognised when incurred on berdasarkan metode akrual. an accrual basis.

s. Laba per saham s. Earnings per share

Laba bersih per saham dasar dihitung Basic earnings per share is computed by dengan membagi laba bersih dengan rata- dividing net income by the weighted-average rata tertimbang dari saham yang beredar number of shares outstanding during the pada periode yang bersangkutan. period.

Laba bersih per saham dilusian dihitung Diluted earnings per share is calculated by dengan membagi laba bersih dengan rata- dividing net income by the weighted average rata tertimbang jumlah saham yang beredar number of shares outstanding plus the ditambah dengan rata-rata tertimbang jumlah weighted average number of shares saham yang akan diterbitkan atas konversi outstanding which would be issued on the efek yang berpotensi saham yang bersifat conversion of the dilutive potential shares. dilutif.

t. Pelaporan segmen t. Segment reporting

Pembuat keputusan operasional The chief operating decision-maker has been diidentifikasikan sebagai dewan direksi dan identified as board of directors and komite manajemen eksekutif. Pembuat management executive committee. The chief keputusan operasional menelaah pelaporan operating decision-maker reviews the internal dengan tujuan untuk menilai kinerja Company’s internal reporting in order to dan mengalokasikan sumber daya. Pembuat assess performance and allocate resources. keputusan operasional sudah menentukan The chief operating decision-maker has segmen operasi berdasarkan laporan determined the operating segment based on tersebut dan mempertimbangkan bisnis dari this report and considered the business from segmen geografis. a geographical segment.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

u. Selisih nilai transaksi restrukturisasi u. Difference in value from restructuring entitas sepengendali transactions among entities under common control

Transaksi restrukturisasi entitas Restructuring transactions of entities under sepengendali adalah transaksi yang common control are transactions to transfer mengalihkan aset, liabilitas, saham dan assets, liabilities, shares and other instrumen kepemilikan lainnya diantara ownership instruments between parties entitas sepengendali yang tidak under the same control which do not result in menimbulkan laba atau rugi bagi seluruh profit or loss for the whole group or for an kelompok perusahaan ataupun entitas individual entity of the group. Since a individual dalam kelompok perusahaan transaction between entities under common tersebut. Karena transaksi restrukturisasi control does not change the economic entitas sepengendali tidak mengakibatkan substance of ownership of the other perubahan substansi ekonomi kepemilikan instruments that are exchanged, both assets lainnya yang dipertukarkan, maka aset and liabilities, the ownership of which is maupun liabilitas yang kepemilikannya transferred, should be recognised at book dialihkan harus dicatat sesuai dengan nilai value in the same manner as a business buku seperti penggabungan usaha combination that is accounted for by use of berdasarkan metode penyatuan kepemilikan the pooling of interest method. (pooling of interest).

Selisih antara harga pengalihan dengan nilai The difference between the transfer price buku sehubungan dengan restrukturisasi and the book value arising from restructuring entitas sepengendali bukan merupakan transactions of entities under common goodwill melainkan dicatat sebagai akun control is not goodwill, but it should be “Selisih Nilai Transaksi Restrukturisasi recorded under the account “Difference in Entitas Sepengendali” dan disajikan sebagai Value from Restructuring Transactions bagian dari ekuitas pada laporan posisi among Entities under Common Control” and keuangan . presented as a component of the equity section in the statements of financial position.

Saldoakun“SelisihNilaiTransaksi The balance of the account “Difference in Restrukturisasi Entitas Sepengendali” dapat Value from Restructuring Transactions berubah pada saat adanya transaksi among Entities under Common Control” can resiprokal antara entitas sepengendali yang change when there are reciprocal sama, adanya peristiwa kuasi reorganisasi, transactions between entities under common hilangnya status substansi sepengendalian control, there is quasi-reorganisation, loss of antara entitas yang pernah bertransaksi, atau under common control substance between pelepasan aset, liabilitas, saham, atau transacting entities, or transfer of assets, instrumen kepemilikan lainnya yang liabilities, equity or other ownership mendasari terjadinya selisih transaksi instruments that cause the difference from restrukturisasi entitas sepengendali ke pihak restructuring under common entities lain yang tidak sepengendali. transactions to another party which is not under common control.

Dalam menerapkan metode penyatuan In applying the pooling of interests method, kepemilikan, unsur-unsur laporan keuangan the financial statement items of the dari perusahan yang direstrukturisasi untuk restructured entities for the period in which periode terjadinya restrukturisasi tersebut the restructuring transactions occur and for dan untuk periode perbandingan yang any comparative periods disclosed should be disajikan, harus disajikan sedemikian rupa presented as if they had been combined from seolah-olah perusahaan tersebut telah the date when the common control exists. bergabung sejak tanggal entitas yang bergabung berada dalam sepengendalian.

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2. IKHTISAR KEBIJAKAN AKUNTANSI PENTING 2. SUMMARY OF SIGNIFICANT ACCOUNTING (lanjutan) POLICIES (continued)

v. Instrumen keuangan derivatif v. Derivative financial instruments

Instrumen derivatif diakui awalnya sebesar Derivative instruments are initially recognised nilai wajar. at fair value.

Metode pengakuan keuntungan atau The method of recognising the resulting kerugian tergantung pada apakah derivatif gains or losses depends on whether the tersebut ditetapkan sebagai instrumen derivative is designated as a hedging lindung nilai untuk tujuan akuntansi dan sifat instrument for accounting purposes at the dari risiko yang dilindung nilai. outset and the nature of the item being hedged.

Perubahan nilai wajar derivatif yang tidak Changes in the fair value of derivatives that memenuhi kriteria lindung nilai untuk tujuan do not meet the criteria of hedging for akuntansi diakui pada laporan laba rugi accounting purposes are recorded in the komprehensif. statements of comprehensive income.

Perubahan nilai wajar derivatif yang Changes in the fair value of derivative ditetapkan dan memenuhi kriteria lindung instruments that are designated and qualified nilai atas arus kas untuk tujuan akuntansi as a cash flow hedge for accounting dan efektif, diakui sebagai “pendapatan purposes and that are effective are komprehensif lain” pada akun ekuitas. Saldo recognised as “other comprehensive akumulasi “pendapatan komprehensif lain” income”. The accumulated amounts in “other diakui di laporan laba rugi komprehensif comprehensive income” are recognised in pada periode yang sama dengan saat the profit or loss in the same period during dimana transaksi yang dilindung nilai oleh which the transactions covered by these instrumen derivatif tersebut mempengaruhi derivative instruments affect the statements laporan laba rugi komprehensif, atau pada of comprehensive income, or when a hedge saat instrumen tidak lagi memenuhi kriteria no longer meets the criteria for hedge akuntansi lindung nilai. accounting.

w. Dividen w. Dividend

Pembagian dividen kepada para pemegang Dividends distribution to the Company’s saham Perusahaan diakui sebagai sebuah shareholders is recognised as a liability in the liabilitas dalam laporan keuangan Company’s financial statements in the period Perusahaan pada periode ketika dividen in which the dividends are approved by the tersebut disetujui oleh para pemegang Company’s shareholders. saham Perusahaan.

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3. TRANSAKSI PENGGABUNGAN USAHA 3. MERGER TRANSACTION

Pada tanggal 1 April 2010, PT Meadow Indonesia On 1 April 2010, PT Meadow Indonesia acquired mengakuisisi 98% saham Perusahaan. 98% of the Company’s shares. Following the Sehubungan dengan akuisisi tersebut, acquisition, a mandatory offer was made by PT Meadow Indonesia melakukan penawaran PT Meadow Indonesia in respect of the 2% of the wajib berkaitan dengan 2% dari modal issued share capital of the Company that was held by the public. Upon completion of the ditempatkan Perusahaan yang dimiliki oleh mandatory tender offer, PT Meadow Indonesia publik. Setelah penyelesaian penawaran wajib held 98.15% of the Company’s issued share tersebut, PT Meadow Indonesia memiliki 98.15% capital. dari modal ditempatkan Perusahaan.

Pada tanggal 30 September 2011, PT Meadow On 30 September 2011, PT Meadow Indonesia Indonesia dan Perusahaan menyelesaikan and the Company completed their merger, with proses penggabungan usaha mereka dengan the Company as the surviving entity and Perusahaan sebagai entitas yang menerima PT Meadow Indonesia was dissolved by law. penggabungan dan PT Meadow Indonesia bubar Although PT Meadow Indonesia and the Company had been merged legally on demi hukum. Meskipun PT Meadow Indonesia 30 September 2011, the economic and dan Perusahaan bergabung secara hukum pada commercial substance of the merger is effective tanggal 30 September 2011, akan tetapi secara from 1 April 2010, the date of the acquisition. substansi ekonomi dan komersil efektif sejak Since both entities were entities under common tanggal akuisisi pada 1 April 2010. Karena kedua control at that date, the financial results of PT entitas merupakan entitas sepengendali pada Meadow Indonesia and the Company have been tanggal tersebut, hasil keuangan PT Meadow combined using the book value of such assets Indonesia dan Perusahaan digabungkan dengan and liabilities transferred in the merger. menggunakan nilai buku aset dan liabilitas yang Transactions between entities under common ditransfer pada saat penggabungan usaha. control are recognised at book value in the same manner as a business combination that is Transaksi antar entitas sepengendali dicatat accounted for using the pooling of interest dengan nilai buku seperti penggabungan usaha method as provided for under SFAS No. 38 berdasarkan metode penyatuan kepemilikan “Accounting for Restructuring Transactions of (pooling of interest) sesuai dengan PSAK No. 38 Entities under Common Control”. “Akuntansi Restrukturisasi Entitas Sepengendali”.

Selisih antara harga pengalihan yang dibayar The difference between the transfer price paid ketika PT Meadow Indonesia mengakuisisi when PT Meadow Indonesia acquired the Perusahaan dan nilai buku PT Meadow Indonesia Company and the book value of PT Meadow pada saat akuisisi akibat transaksi restrukturisasi Indonesia’s net assets as at the acquisition date dari entitas sepengendali dicatat sebagai akun arising from the restructuring transactions of "Selisih nilai transaksi restrukturisasi entitas entities under common control is recorded under sepengendali" sejumlah Rp 3.767.126 dan the account “Difference in Value from disajikan sebagai bagian dari ekuitas di dalam Restructuring Transactions among Entities under laporan posisi keuangan. Common Control” amounting to Rp 3,767,126 and presented as a component of the equity section in the statements of financial position.

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3. TRANSAKSI PENGGABUNGAN USAHA 3. MERGER TRANSACTION (continued) (lanjutan) Dalam penerapan metode penyatuan In applying the pooling of interest method, the kepemilikan, unsur-unsur laporan keuangan dari financial statement items of the merged entities perusahaan yang melakukan penggabungan for the period in which the restructuring usaha untuk periode terjadinya restrukturisasi transactions occur and for any comparative tersebut dan periode perbandingan yang periods disclosed have been presented as if the disajikan, telah disajikan sedemikian rupa seolah- merger had occurred from the date the common olah penggabungan tersebut telah terjadi sejak control exists, which is from 1 April 2010. awal periode entitas yang bergabung berada Consequently, the preacquisition operating dalam sepengendalian, yaitu sejak 1 April 2010. results and cash flows of the Company were Oleh sebab itu, hasil usaha serta arus kas excluded. The Company’s financial statements Perusahaan sebelum akuisisi dikeluarkan. post merger for the year ended 31 December Laporan keuangan perusahaan setelah 2010 present 12 months of PT Meadow panggabungan usaha untuk tahun berakhir pada Indonesia’s operating results and cash flows, and tanggal 31 Desember 2010 menyajikan hasil 9 months of the Company’s pre merger operating usaha serta arus kas PT Meadow Indonesia results and cash flows starting 1 April 2010. selama 12 bulan dan hasil usaha serta arus kas Accordingly, the statements of comprehensive Perusahaan sebelum penggabungan selama 9 income, changes in equity, cash flows and notes bulan sejak 1 April 2010. Oleh sebab itu, Iaporan to the financial statements for the years ended laba rugi komprehensif, laporan perubahan 31 December 2012 and 2011 are not comparable ekuitas, laporan arus kas dan catatan atas with these statements for the year ended laporan keuangan untuk tahun yang berakhir 31 December 2010. pada tanggal-tanggal 31 Desember 2012 dan 2011 tidak dapat diperbandingkan dengan laporan-laporan serupa untuk tahun yang berakhir pada tanggal 31 Desember 2010.

4. ESTIMASI DAN PERTIMBANGAN AKUNTANSI 4. CRITICAL ACCOUNTING ESTIMATES AND YANG PENTING JUDGEMENTS Estimasi dan pertimbangan terus dievaluasi Estimates and judgements are continually berdasarkan pengalaman historis dan faktor- evaluated and are based on historical faktor lain, termasuk ekspektasi peristiwa masa experience and other factors, including depan yang diyakini wajar berdasarkan kondisi expectations of future events that are believed to yang ada. Hasil aktual dapat berbeda dengan be reasonable under the circumstances. Actual jumlah yang diestimasi. Estimasi dan asumsi results may differ from these estimates. The yang memiliki pengaruh signifikan terhadap estimates and assumptions that have a jumlah tercatat aset dan liabilitas diungkapkan di significant effect on the carrying amounts of bawah ini. assets and liabilities are disclosed below.

Imbalan kerja Employee benefits Nilai kini dari kewajiban imbalan pasti tergantung The present value of the defined benefit pada sejumlah faktor yang ditentukan obligation depends on a number of factors that berdasarkan basis aktuarial dengan are determined on an actuarial basis using a menggunakan sejumlah asumsi. Asumsi yang number of assumptions. The assumptions used digunakan dalam menentukan biaya untuk in determining the cost for retirement benefits imbalan pensiun termasuk tingkat diskonto. include the discount rate. Any changes in these Setiap perubahan dalam asumsi ini akan assumptions will impact the carrying amount of berdampak pada nilai tercatat atas kewajiban retirement benefits obligations. imbalan pensiun.

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4. ESTIMASI DAN PERTIMBANGAN AKUNTANSI 4. CRITICAL ACCOUNTING ESTIMATES AND YANG PENTING (lanjutan) JUDGEMENTS (continued) Imbalan kerja (lanjutan) Employee benefits (continued)

Perusahaan menentukan tingkat diskonto yang The Company determines the appropriate sesuai pada setiap akhir periode pelaporan. discount rate at the end of each reporting period. Tingkat bunga ini sebaiknya digunakan untuk This is the interest rate that should be used to menentukan nilai kini dari estimasi arus kas determine the present value of estimated future masa depan yang diharapkan akan diperlukan cash outflows expected to be required to settle untuk menyelesaikan kewajiban imbalan the retirement benefits obligations. In pensiun. Dalam menentukan tingkat diskonto determining the appropriate discount rate, the yang sesuai, Perusahaan mempertimbangkan Company considers the interest rates of tingkat suku bunga dari obligasi pemerintah yang government bonds that are denominated in the didenominasikan dalam mata uang dimana currency in which the benefits will be paid and imbalan tersebut akan dibayarkan dan memiliki that have terms to maturity approximating the periode jatuh tempo mendekati ketentuan terms of the related retirement benefits kewajiban imbalan pensiun yang terkait. obligations.

Asumsi kunci lainnya untuk kewajiban pensiun Other key assumptions for retirement benefits sebagian didasarkan pada kondisi pasar saat ini. obligations are based in part on current market Informasi tambahan diungkapkan dalam Catatan conditions. Additional information is disclosed in 21. Note 21.

Pada tanggal 31 Desember 2012, jika tingkat As at 31 December 2012, were the discount rate diskonto yang digunakan berbeda 1% dari used to differ by 1% from management’s estimasi manajemen, nilai kini dari kewajiban estimates, the present value of obligations would diestimasikan akan menjadi lebih rendah sebesar be an estimated Rp 36,847 lower or Rp 43,046 Rp 36.847 atau lebih tinggi Rp 43.046. higher.

Penghasilan tangguhan Deferred income

Perusahaan membuat estimasi penghasilan The Company made deferred income estimation tangguhan atas kartu poin loyalitas milik on loyalty point card owned by customers issued pelanggan yang diterbitkan oleh Perusahaan by Company amounting to Rp 84,358 (2011: sebesar Rp 84.358 (2011: Rp 93.388 dan 2010: Rp 93,388 and 2010: Rp 60,479). This card Rp 60.479). Kartu ini memperbolehkan allowed the customer to earn points from each of pelanggan untuk memperoleh poin untuk setiap purchase transaction in stores. This point can be transaksi pembelian di gerai. Poin tersebut dapat redeemed to get coupon with the same value of ditukarkan dengan kupon yang nilainya sama the point conversion. dengan konversi atas poin tersebut.

Perhitungan atas penghasilan tangguhan The calculation of this deferred income involves tersebut melibatkan estimasi tingkat pertukaran estimating on redemption rate of the point konversi atas poin tersebut. Ketidakpastian yang conversion. Uncertainty associated with these terkait dengan faktor tersebut dapat factors may result in the ultimate realisable menghasilkan jumlah akhir yang dapat direalisasi amount being different from the reported carrying berbeda dengan jumlah tercatat penghasilan amount of deferred income. tangguhan yang dilaporkan.

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5. KAS DAN SETARA KAS 5. CASH AND CASH EQUIVALENTS

2012 2011 2010

Kas Cash on hand Rupiah 159,770 87,168 54,076 Rupiah Bank Cash in banks Rupiah Rupiah - PT Bank CIMB Niaga Tbk 459,824 712,011 449,704 PT Bank CIMB Niaga Tbk - - PT Bank International PT Bank International - Indonesia Tbk 250,289 136,807 14,029 Indonesia Tbk - PT Bank Mandiri PT Bank Mandiri - (Persero) Tbk 106,321 1,967 1,199 (Persero) Tbk - PT Bank Central Asia Tbk 37,783 8,406 5,999 PT Bank Central Asia Tbk - - PT Bank Negara PT Bank Negara - Indonesia (Persero) Tbk 11,635 5,949 7,594 Indonesia (Persero) Tbk - PT Bank Nationalnobu PT Bank Nationalnobu - (Nobu Bank) 5,045 - - (Nobu Bank) - PT Bank Permata Tbk 4,820 2,948 2,042 PT Bank Permata Tbk - - Bank lainnya 1,628 4 - Other banks - 1,037,115 955,260 534,643 Dolar AS US Dollar - PT Bank CIMB Niaga Tbk 1,944 844 684 PT Bank CIMB Niaga Tbk -

1,039,059 956,104 535,327 Deposito jangka pendek Short-term bank deposits Rupiah Rupiah -PTBankCIMBNiagaTbk - - 500,000 PT Bank CIMB Niaga Tbk -

1,039,059 956,104 1,035,327 Dikurangi: Deduct: Kas dan setara kas yang Restricted cash and cash dibatasi penggunaannya equivalents PT Bank CIMB Niaga Tbk (39,187) (37,130) (36,087) PT Bank CIMB Niaga Tbk

999,872 918,974 999,240

Suku bunga per tahun untuk deposito Rupiah di The annual interest rate for Rupiah deposits in tahun 2010 adalah 7%. 2010 was 7%.

Kas dan setara kas yang dibatasi Restricted cash and cash equivalents is collateral penggunaannya merupakan kas untuk jaminan cash for interest payments on syndicated loans atas pembayaran bunga terhadap pinjaman that are facilitated by PT Bank CIMB Niaga Tbk sindikasi yang difasilitasi PT Bank CIMB and Standard Chartered Bank (see Note 12). Niaga Tbk dan Standard Chartered Bank (lihat Catatan 12).

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6. PERSEDIAAN 6. INVENTORIES 2012 2011 2010

Pakaian pria 142,480 122,628 100,399 Menswear Pakaian wanita 121,157 106,474 93,640 Ladieswear Produk anak-anak 104,297 100,951 80,115 Children product Sepatu 97,819 87,525 67,450 Shoes Perlengkapan rumah tangga Household appliances dan perlengkapan mandi 28,247 30,994 35,304 and toiletries Tas, kosmetik dan Bags, cosmetics and aksesoris 32,269 19,273 29,223 accessories

526,269 467,845 406,131 Dikurangi: Less: Provisi untuk persediaan (6,668) (5,832) (5,347) Provision for inventory

519,601 462,013 400,784

Pada tanggal 31 Desember 2012, persediaan As at 31 December 2012, inventories owned by Perusahaan telah diasuransikan terhadap risiko the Company were insured against losses from kebakaran dan risiko lainnya dengan nilai fire and other risks for Rp 530,600 (2011: pertanggungan sejumlah Rp 530.600 (2011: Rp 452,297 and 2010: Rp 417,206). In Rp 452.297 dan 2010: Rp 417.206). Manajemen management’s opinion, the insurance is berkeyakinan bahwa jumlah ini telah memadai adequate to cover possible losses arising from untuk menutupi kerugian atas risiko-risiko such risks. tersebut di atas.

Manajemen berkeyakinan bahwa provisi Management believes that the provision for persediaan cukup memadai untuk menutupi inventory is adequate to cover loss due to the kemungkinan kerugian karena penurunan nilai decline in the value of inventories and risk from persediaan dan risiko kehilangan persediaan. inventory loss.

7. ASET TETAP 7. FIXED ASSETS

2012 Awal/ Penambahan/ Reklasifikasi/ Pengurangan/ Akhir/ Beginning Addition Reclassification Disposal Ending Nilai perolehan Acquisition cost Renovasi bangunan 251,188 13,561 59,632 (2) 324,379 Building renovation Equipment and Peralatan dan instalasi 658,041 145,424 41,804 (4,543) 840,726 installation Kendaraan 2,218 - - - 2,218 Vehicles Aset dalam Assets under pembangunan 28,348 89,512 (101,436)-16,424 construction 939,795 248,497 - (4,545)1,183,747 Akumulasi Accumulated Penyusutan depreciation Renovasi bangunan (113,691) (60,166) - 2 (173,855) Building renovation Equipment and Peralatan dan instalasi (201,603) (115,586) - 3,249 (313,940) installation Kendaraan (1,610)(337)- - (1,947) Vehicles (316,904) (176,089)-3,251 (489,742) Nilai buku bersih 622,891 694,005 Net book value

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Halaman 5/25 Schedule

7. ASET TETAP (lanjutan) 7. FIXED ASSETS (continued)

2011 Awal/ Penambahan/ Reklasifikasi/ Pengurangan/ Akhir/ Beginning Addition Reclassification Disposal Ending Nilai perolehan Acquisition cost Renovasi bangunan 210,695 10,342 34,227 (4,076) 251,188 Building renovation Equipment and Peralatan dan instalasi 516,819 121,471 26,414 (6,663) 658,041 installation Kendaraan 1,485 733 - - 2,218 Vehicles Aset dalam Assets under pembangunan 6,157 82,832 (60,641)-28,348 construction 735,156 215,378 - (10,739)939,795 Akumulasi Accumulated penyusutan depreciation Renovasi bangunan (62,289) (52,866) - 1,464 (113,691) Building renovation Equipment and Peralatan dan instalasi (99,977) (103,520) - 1,894 (201,603) installation Kendaraan (791)(819)- - (1,610) Vehicles (163,057) (157,205)-3,358 (316,904) Nilai buku bersih 572,099 622,891 Net book value

2010 Awal/ Penambahan/ Reklasifikasi/ Pengurangan/ Akhir/ Beginning Addition Reclassification Disposal Ending Nilai perolehan Acquisition cost Renovasi bangunan 165,206 5,497 39,992 - 210,695 Building renovation Equipment and Peralatan dan instalasi 398,812 100,114 17,943 (50) 516,819 installation Kendaraan 1,224 261 - - 1,485 Vehicles Aset dalam Assets under pembangunan 9,275 54,817 (57,935)-6,157 construction

574,517 160,689 - (50)735,156

Akumulasi Accumulated penyusutan depreciation Renovasi bangunan (21,665) (40,624) - - (62,289) Building renovation Equipment and Peralatan dan instalasi (33,042) (66,958) - 23 (99,977) installation Kendaraan (260)(531)- - (791) Vehicles

(54,967) (108,113)-23 (163,057)

Nilai buku bersih 519,550 572,099 Net book value

Perhitungan kerugian penjualan aset tetap The calculation of the loss on sale of fixed assets adalah sebagai berikut: is as follows:

2012 2011 2010

Hasil penjualan 1,058 510 499 Sales proceeds Nilai buku bersih (1,294) (7,381) (27) Net book value Net book value of Nilai buku aset tetap yang fixed assets destroyed terbakar (lihat Catatan 32) - 5,460 - by fire (see Note 32)

(Kerugian)/keuntungan (Loss)/gain on sale of penjualan aset tetap (236) (1,411)472 fixed assets

Beban penyusutan untuk tahun yang berakhir Depreciation expenses for the year ended 31 Desember 2012 sejumlah Rp 176.089 (2011: 31 December 2012 of Rp 176,089 (2011: Rp 157.205 dan 2010: Rp 108.113) telah Rp 157,205 and 2010: Rp 108,113) were charged dibebankan sebagai beban umum dan as general and administration expenses (see administrasi (lihat Catatan 19). Note 19).

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Halaman 5/26 Schedule

7. ASET TETAP (lanjutan) 7. FIXED ASSETS (continued)

Pada tanggal 31 Desember 2012, aset tetap As at 31 December 2012, fixed assets were diasuransikan terhadap risiko kerugian akibat insured against losses from fire and other risks kebakaran dan risiko kerugian lainnya dengan for Rp 1,223,112 (2011: Rp 990,676 and 2010: nilai pertanggungan sebesar Rp 1.223.112 (2011: Rp 888,985). In management’s opinion, the Rp 990.676 dan 2010: Rp 888.985). Manajemen insurance is adequate to cover possible losses berkeyakinan bahwa jumlah ini telah memadai arising from such risks. untuk menutupi kerugian atas risiko-risiko tersebut di atas.

Manajemen berkeyakinan bahwa tidak terdapat Management believes there was no impairment penurunan nilai buku dari aset tetap. of fixed assets.

Aset dalam pembangunan terdiri atas renovasi Assets under construction comprised building bangunan, peralatan dan instalasi. Pada renovation, equipment and installation. As at 31 Desember 2012, persentase penyelesaian 31 December 2012, the average percentage of rata-rata atas aset dalam pembangunan yang completion of the assets under construction diakui dalam pelaporan keuangan adalah recognised for financial reporting ranged from berkisar 20%-70% dan diperkirakan akan selesai 20%-70% and construction is estimated to be pada tahun 2013 (2011: 20%-75% dan 2010: completed in the year 2013 (2011: 20%-75% and 20%-95%). 2010: 20%-95%).

8. BIAYA DIBAYAR DIMUKA - SEWA 8. PREPAID EXPENSES - LEASE

2012 2011 2010

PT Matahari Putra Prima Tbk 234,841 3,531 2,995 PT Matahari Putra Prima Tbk PT Mitra Anda Sukses PT Mitra Anda Sukses Bersama 29,928 - - Bersama PT Suryana Istana Pasundan 20,383 14,361 8,819 PT Suryana Istana Pasundan PT Borneo Inti Graha 8,282 - - PT Borneo Inti Graha PT Paramita Bangun Persada 8,025 602 - PT Paramita Bangun Persada Lain-lain 55,988 71,711 53,966 Others

357,447 90,205 65,780 Bagian lancar: Current portion: Uang muka sewa (13,653) (11,208) (23,261) Rental advance Biaya dibayar dimuka - sewa (73,696) (49,190) (28,041) Prepaid expense - lease

Sewa jangka panjang 270,098 29,807 14,478 Long-term lease

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Halaman 5/27 Schedule

9. UTANG USAHA - PIHAK KETIGA 9. TRADE PAYABLES - THIRD PARTIES

2012 2011 2010 Pembelian 380,873 322,009 262,273 Purchase Konsinyasi 673,872 569,189 456,205 Consignment

1,054,745 891,198 718,478

Utang usaha pembelian merupakan liabilitas Trade payables of purchase represent liabilities kepada para pemasok pihak ketiga dalam rangka to third party suppliers for the purchase of pembelian barang dagangan. merchandise.

Utang usaha konsinyasi merupakan liabilitas Trade payables of consignment represent yang berasal dari hasil penjualan konsinyasi yang liabilities arising from consignment sales belum disetorkan sampai dengan tanggal laporan proceeds received, but not yet remitted as of posisi keuangan. statements of financial position date.

Pada tanggal 31 Desember 2012, 2011 dan As at 31 December 2012, 2011 and 2010 all the 2010, seluruh nilai tercatat utang usaha carrying amount of the Company’s trade berdenominasi Rupiah dan tidak ada jaminan payables were denominated in Rupiah and no yang diberikan sehubungan dengan utang usaha. collateral is pledged in respect of the trade payables.

10. AKRUAL 10. ACCRUALS

2012 2011 2010

Bonus dan insentif 102,405 86,706 83,642 Bonus and incentives Utilitas 53,128 52,253 44,268 Utilities Aset tetap 29,554 23,825 16,446 Fixed assets Sewa 26,758 41,801 23,210 Rent Pemasaran 25,229 20,945 19,284 Marketing Transportasi 9,488 10,397 5,830 Transportation Konsultan 6,376 6,156 1,126 Consultant Bunga 5,189 1,597 2,989 Interest Perjalanan dinas 1,658 3,896 2,518 Business travel Pajak reklame 402 438 2,822 Billboard tax Lain-lain 10,579 5,343 6,072 Others

270,766 253,357 208,207

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Halaman 5/28 Schedule

11. PERPAJAKAN 11. TAXATION

a. Pajak dibayar dimuka a. Prepaid taxes

2012 2011 2010

Pajak Pertambahan Nilai 44,722 45,821 23,728 Value Added Tax

b. Utang pajak b. Taxes payable

2012 2011 2010

Pajak Penghasilan: Income taxes: Badan Corporate - Pasal 25 19,185 33,814 3,517 Article 25 - - Pasal 29 162,155 80,022 135,174 Article 29 -

181,340 113,836 138,691

Lain-lain Others - Pasal 21 2,724 3,695 12,107 Article 21 - - Pasal 23 dan 4 (2) 6,437 9,829 14,385 Articles 23 and 4 (2) - - Pasal 26 514 487 903 Article 26 -

9,675 14,011 27,395

191,015 127,847 166,086

c. Beban/(manfaat) pajak penghasilan c. Income tax expense/(benefit)

2012 2011 2010

Kini 383,346 312,575 206,288 Current Tangguhan 4,768 (42,629) 8,310 Deferred

388,114 269,946 214,598

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11. PERPAJAKAN (lanjutan) 11. TAXATION (continued)

c. Beban/(manfaat) pajak penghasilan c. Income tax expense/(benefit) (continued) (lanjutan)

Rekonsiliasi antara laba sebelum pajak A reconciliation between the profit before penghasilan dengan penghasilan kena pajak income tax and taxable income of the Perusahaan adalah sebagai berikut: Company is as follows:

2012 2011 2010

Laba sebelum pajak Profit before penghasilan 1,158,995 735,594 277,215 income tax

Perbedaan temporer: Temporary differences: Employee benefits - - Kewajiban imbalan kerja 43,073 31,891 19,300 obligations - Penyusutan dan Depreciation and - amortisasi (62,979) (67,567) (57,882) amortisation - Provisi untuk persediaan 836 485 5,347 Provision for inventory -

Perbedaan permanen: Permanent differences: - Beban yang tidak dapat dikurangkan 420,671 583,446 605,259 Non deductible expenses - - Pendapatan yang telah dikenakan pajak final (27,211) (33,551) (24,088) Income subject to final tax -

Penghasilan kena pajak 1,533,385 1,250,298 825,151 Taxable income

Beban pajak penghasilan kini 383,346 312,575 206,288 Current income tax expense Efek penggabungan usaha - - 22,382 Effect of merger Pembayaran pajak Prepayment of income penghasilan dimuka: taxes: - Pasal 23 (46) (69,796) (46,313) Article 23 - - Pasal 25 (221,145) (162,757) (47,183) Article 25 -

Kurang bayar pajak penghasilan 162,155 80,022 135,174 Income tax underpayment

Dalam laporan keuangan ini jumlah In these financial statements, the amounts of penghasilan kena pajak untuk tahun yang taxableincomefortheyearended berakhir 31 Desember 2012 didasarkan atas 31 December 2012 are based on a perhitungan sementara sampai Perusahaan preliminary calculation until the Company menyampaikan Surat Pemberitahuan submits its annual corporate income tax Tahunan pajak penghasilan badan. returns.

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11. PERPAJAKAN (lanjutan) 11. TAXATION (continued)

c. Beban/(manfaat) pajak penghasilan c. Income tax expense/(benefit) (continued) (lanjutan)

Rekonsiliasi antara beban pajak penghasilan The reconciliation between the Company’s Perusahaan dengan hasil perkalian laba income tax expense and the theoretical tax akuntansi Perusahaan sebelum pajak amount using the tax rate on the Company’s penghasilan dengan tarif pajak yang berlaku profit before income tax is as follows: adalah sebagai berikut: 2012 2011 2010 Laba sebelum pajak penghasilan 1,158,995 735,594 277,215 Profit before income tax

Pajak dihitung pada tarif Tax calculated yang berlaku (25%) 289,749 183,899 69,304 at applicable rate (25%) Pendapatan yang telah dikenakan pajak final (6,803) (8,388) (6,022) Income subject to final tax Penyesuaian saldo awal Adjustment on beginning aset pajak tangguhan balance of deferred tax dari aset tetap - (51,426) - asset from fixed assets Beban yang tidak dapat dikurangkan 105,168 145,861 151,316 Non deductible expenses

Beban pajak penghasilan 388,114 269,946 214,598 Income tax expense

d. Aset pajak tangguhan d. Deferred tax assets

Dikreditkan/ (dibebankan) ke laporan laba rugi komprehensif/ Credited/ (charged) to statements of Awal/ comprehensive Akhir/ Beginning 2012 income Ending 2012 Kewajiban imbalan kerja 43,212 10,768 53,980 Employee benefits obligations Provisi untuk persediaan 1,458 209 1,667 Provision for inventory Perbedaan antara nilai buku Difference between bersih aset tetap commercial and fiscal net komersial dan fiskal 13,949 (15,745) (1,796) book value of fixed assets 58,619 (4,768) 53,851

Dikreditkan/ (dibebankan) ke laporan laba rugi komprehensif/ Credited/ (charged) to statements of Awal/ comprehensive Akhir/ Beginning 2011 income Ending 2011 Kewajiban imbalan kerja 35,239 7,973 43,212 Employee benefits obligations Provisi untuk persediaan 1,337 121 1,458 Provision for inventory Perbedaan antara nilai buku Difference between bersih aset tetap commercial and fiscal net komersial dan fiskal (20,586) 34,535 13,949 book value of fixed assets 15,990 42,629 58,619

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Halaman 5/31 Schedule

11. PERPAJAKAN (lanjutan) 11. TAXATION (continued) d. Aset pajak tangguhan (lanjutan) d. Deferred tax assets (continued)

Dikreditkan/ (dibebankan) ke laporan laba rugi komprehensif/ Credited/ (charged) to statements of Awal/ comprehensive Akhir/ Beginning 2010 income Ending 2010

Kewajiban imbalan kerja 30,415 4,824 35,239 Employee benefits obligations Provisi untuk persediaan - 1,337 1,337 Provision for inventory Perbedaan antara nilai buku Difference between bersih aset tetap commercial and fiscal net komersial dan fiskal (6,115) (14,471) (20,586) book value of fixed assets

24,300 (8,310) 15,990

e. Administrasi e. Administration

Berdasarkan Undang-Undang Perpajakan Under the Taxation Laws of Indonesia, the yang berlaku di Indonesia, Perusahaan Company submits tax returns on the basis of menghitung, menetapkan dan membayar self assessment. For fiscal years before sendiri besarnya jumlah pajak yang terutang. 2008, DGT may assess or amend taxes Untuk tahun pajak sebelum 2008, DJP dapat within ten years of the time the tax becomes menetapkan atau mengubah kewajiban pajak due, or until the end of 2013, whichever is dalam batas waktu sepuluh tahun sejak saat earlier. For fiscal year 2008 and subsequent terutangnya pajak, atau akhir tahun 2013, years, the DGT may assess or amend taxes mana yang lebih awal. Untuk tahun pajak within five years of the time the tax becomes 2008 dan tahun-tahun selanjutnya, DJP due. dapat menetapkan atau mengubah kewajiban pajak tersebut dalam batas waktu lima tahun sejak saat terutangnya pajak.

12. PINJAMAN BANK 12. BANK LOANS

2012 2011 2010 Pinjaman sindikasi: Syndicated loan: -PTBankCIMB PT Bank CIMB - Niaga Tbk (“CIMB”) 1,212,393 907,774 1,138,750 Niaga Tbk (“CIMB”) - Standard Chartered Bank 666,465 598,851 1,138,750 Standard Chartered Bank - - PT Bank International PT Bank International - Indonesia Tbk 1,105,276 763,295 570,000 Indonesia Tbk - PT Bank Danamon PT Bank Danamon - Indonesia Tbk 85,119 113,593 142,500 Indonesia Tbk - PT Bank Permata Tbk 77,671 97,500 PT Bank Permata Tbk - Dikurangi: Less: Beban ditangguhkan (110,157) (93,726) (120,471) Deferred charges 2,959,096 2,367,458 2,967,029 Dikurangi: Less: Bagian jatuh tempo Portion due within dalam satu tahun (483,935) (284,947) (233,255) one year Bagian jatuh tempo lebih dari satu tahun 2,475,161 2,082,511 2,733,774 Portion due over one year

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Halaman 5/32 Schedule

12. PINJAMAN BANK (lanjutan) 12. BANK LOANS (continued) Pinjaman sindikasi Syndicated loan

Pada tanggal 5 Maret 2010, Perusahaan, selaku On 5 March 2010, the Company, as the borrower, peminjam, mengadakan perjanjian fasilitas entered into a syndicated loan facility agreement pinjaman sindikasi dengan beberapa bank with several banks (CIMB, Standard Chartered (CIMB, Standard Chartered Bank, PT Bank Bank, PT Bank International Indonesia Tbk, International Indonesia Tbk, PT Bank Danamon PT Bank Danamon Indonesia Tbk, PT Bank Indonesia Tbk, PT Bank Permata Tbk), yang Permata Tbk), facilitated by CIMB and Standard difasilitasi CIMB dan Standard Chartered Bank, Chartered Bank, with total facility amount of dengan total nilai fasilitas sebesar Rp 3.500.000 Rp 3,500,000 which comprised long term loan yang terdiri dari fasilitas pinjaman jangka panjang facility of Rp 3,250,000 and revolving loan facility sebesar Rp 3.250.000 dan pinjaman revolving of Rp 250,000. sebesar Rp 250.000. Atas fasilitas pinjaman ini, pada tanggal 1 April For this loan facility, Rp 3,250,000 was drawn 2010, sebesar Rp 3.250.000 telah ditarik. down on 1 April 2010. The loan had a floating Pinjaman ini dikenakan bunga dengan suku interest rate at SBI + 6% per annum that was bunga mengambang sebesar SBI + 6% per payable quarterly until 30 December 2016. On 8 tahun yang harus dibayar setiap kuartal sampai July 2011, the agreement was amended dengan 30 Desember 2016. Pada tanggal 8 Juli regarding the changes in floating interest rate at 2011, perjanjian tersebut telah diubah mengenai the time deposit + 6%. The purpose of the loans perubahan suku bunga mengambang sebesar is to finance PT Meadow Indonesia to acquire the tingkat bunga deposito berjangka + 6%. Pinjaman Company and the Company’s working capital. yang diperoleh diperuntukan untuk mendanai PT Meadow Indonesia untuk mengakuisisi Perusahaan dan modal kerja Perusahaan.

Sejak tanggal 6 September 2010, Perusahaan Starting on 6 September 2010, the Company mendapatkan fasilitas swap suku bunga dari entered into an interest rate swap facility with Standard Chartered Bank untuk bagian tertentu Standard Chartered Bank for certain portion of dari saldo pinjaman sindikasi bank dengan bunga the syndicated loan balance with a fixed interest tetap sebesar 8,42%. Fasilitas ini telah digunakan rate of 8.42%. The facility has been utilised by oleh Perusahaan dan akan berakhir pada 30 Juni the Compay and will end on 30 June 2013. 2013.

Pada tanggal 28 Februari 2011 dan 8 Maret On 28 February 2011 and 8 March 2012, the 2012, Perusahaan telah melakukan pembayaran Company made accelerated payments of the pokok pinjaman dipercepat masing-masing loan principal amounting to Rp 400,000 and Rp sebesar Rp 400.000 dan Rp 350.000. 350,000, respectively.

Pada tanggal 28 Juni 2012, Perusahaan On 28 June 2012, the Company signed an menandatangani Perjanjian Perubahan dan Amendment and Restatement of the syndicated Pernyataan Kembali atas perjanjian fasilitas loan facility agreement. In the amendment to the pinjaman sindikasi. Di dalam perubahan agreement, the Company obtained additional perjanjian tersebut, Perusahaan mendapatkan loan facility of Rp 1,225,000 which has been fully tambahan fasilitas pinjaman sebesar Rp drawn down on 7 August 2012. This loan is 1.225.000 yang telah ditarik penuh oleh payable quarterly with first installment on 31 Perusahaan tanggal 7 Agustus 2012. Pinjaman March 2013 until 30 December 2016. The ini dibayar setiap kuartal dengan pembayaran purpose of this new facility is for repayment of the pertama dilakukan pada tanggal 31 Maret 2013 remaining principal and accrued interest of the sampai dengan 30 Desember 2016. Tujuan dari outstanding loan from PT Matahari Pacific (see tambahan fasilitas baru adalah untuk pelunasan Note 23). pokok dan hutang bunga atas pinjaman dari PT Matahari Pacific (lihat Catatan 23).

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12. PINJAMAN BANK (lanjutan) 12. BANK LOANS (continued) Pinjaman sindikasi (lanjutan) Syndicated loan (continued) Tingkat suku bunga untuk fasilitas pinjaman The interest rate applied for the existing and new sindikasi yang terdahulu dan yang baru berubah syndicated loan facilities changed to JIBOR + menjadi JIBOR + 4,75% yang dibayar di setiap 4.75% per annum which is payable quartely. kuartal. Berdasarkan Akta Notaris Sutjipto, S.H., MKn., Based on Notarial Deed No. 26 dated 6 July 2010 No. 26 tanggal 6 Juli 2010, Perusahaan of Sutjipto, S.H., MKn., the Company provided a memberikan jaminan fidusia atas fasilitas fiduciary guarantee for the syndicated loan facility pinjaman sindikasi berupa seluruh kas dan setara by using all cash and cash equivalents, kas, persediaan dan aset tetap yang dimiliki inventories and fixed assets to CIMB. Perusahaan kepada CIMB. Perusahaan juga diwajibkan untuk memiliki kas The Company is also required to maintain dan setara kas yang dibatasi penggunaannya restricted cash and cash equivalents amounting sebesar Rp 39.187 pada tanggal 31 Desember to Rp 39,187 as at 31 December 2012 (2011: 2012 (2011: Rp 37.130 dan 2010: Rp 36.087) Rp 37,130 and Rp 36,087) (see Note 5). (lihat Catatan 5). Sesuai dengan perjanjian fasilitas pinjaman Based on the syndicated loan facility agreement, sindikasi, Perusahaan diwajibkan memenuhi the Company is required to comply with certain batasan-batasan tertentu antara lain batasan covenants such as financial ratio covenants that rasio keuangan seperti rasio net leverage, gross consist of net leverage, gross leverage and debt leverage,dandebt service coverage.Pada service coverage ratio. As at 31 December 2012, tanggal 31 Desember 2012, 2011 dan 2010, 2011 and 2010, the Company has complied with Perusahaan telah memenuhi batasan-batasan the covenants in the borrowing agreement. yang diwajibkan dalam perjanjian pinjaman tersebut. Pada tanggal 31 Desember 2012, 2011 dan 2010 As at 31 December 2012, 2011 and 2010 the Perusahaan memiliki fasilitas pinjaman revolving Company has undrawn revolving borrowing yang belum digunakan sebesar Rp 250.000. facilities of Rp 250,000.

13. MODAL SAHAM 13. SHARE CAPITAL Komposisi pemegang saham Perusahaan pada The composition of the Company’s shareholders tanggal 31 Desember 2012 dan 2011 adalah as at 31 December 2012 and 2011 was as sebagai berikut: follows: Jumlah saham ditempatkan dan disetor/ Persentase Number of shares kepemilikan/ issued Percentage of Jumlah/ and paid ownership Total Seri A - nilai nominal Rp 5.000 (nilai penuh)/ Type A - par value Rp 5,000 (full amount) Asia Color Company Ltd 4,683,831 0.16 23,419 Lain-lain/Others 1,485,129 0.05 7,426 Sub-jumlah/sub-total 6,168,960 0.21 30,845 Seri B - nilai nominal Rp 350 (nilai penuh)/ Type B - par value Rp 350 (full amount) Asia Color Company Ltd 211,037,131 7.23 73,863 Lain-lain/Others 48,059,189 1.65 16,821 Sub-jumlah/sub-total 259,096,320 8.88 90,684 Seri C - nilai nominal Rp 100 (nilai penuh)/ Type C - par value Rp 100 (full amount) Asia Color Company Ltd 2,648,213,669 90.76 264,821 Lain-lain/Others 4,439,131 0.15 444 Sub-jumlah/sub-total 2,652,652,800 90.91 265,265 2,917,918,080 100.00 386,794

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13. MODAL SAHAM (lanjutan) 13. SHARE CAPITAL (continued)

Komposisi pemegang saham tersebut adalah The composition of the Company’s shareholders setelah transaksi penggabungan usaha (lihat was after the merger transaction (see Note 1b). Catatan 1b).

Tidak terdapat perbedaan hak antara saham seri There are no differences in the rights of type A, B A, B dan C. and C shares.

Komposisi pemegang saham Perusahaan 31 The composition of the Company’s shareholders Desember 2010 adalah sebagai berikut: as at 31 December 2010 was as follows:

Jumlah saham ditempatkan dan disetor/ Persentase Number of shares kepemilikan/ issued Percentage of Jumlah/ and paid ownership Total Seri A - nilai nominal Rp 5.000 (nilai penuh)/ Type A - par value Rp 5,000 (full amount) PT Meadow Indonesia 4,683,842 0.16 23,419 Lain-lain/Others 1,485,118 0.05 7,426 Sub-jumlah/sub-total 6,168,960 0.21 30,845 Seri B - nilai nominal Rp 350 (nilai penuh)/ Type B - par value Rp 350 (full amount) PT Meadow Indonesia 211,037,636 7.23 73,863 Lain-lain/Others 48,058,684 1.65 16,821 Sub-jumlah/sub-total 259,096,320 8.88 90,684 Seri C - nilai nominal Rp 100 (nilai penuh)/ Type C - par value Rp 100 (full amount) PT Meadow Indonesia 2,648,220,000 90.76 264,822 Lain-lain/Others 4,432,800 0.15 443 Sub-jumlah/sub-total 2,652,652,800 90.91 265,265 2,917,918,080 100.00 386,794

14. TAMBAHAN MODAL DISETOR 14. ADDITIONAL PAID IN CAPITAL

Rincian akun ini pada posisi tanggal 31 The account details as at 31 December 2012, Desember 2012, 2011 dan 2010 adalah sebagai 2011 and 2010 was as follows: berikut:

Agio saham atas PUT I dan II kepada para pemegang saham dalam rangka penerbitan Hak Memesan Efek Terlebih Dahulu (”HMETD”)/ Share premium from LPO Iand II with pre-emptive rights to the shareholders 198,023 Beban emisi saham/Share issuance expense (2,831) Bersih/Net 195,192

Agio saham yang berasal dari PUT I dan II The share premiums arising from the LPO I and II kepada para pemegang saham dalam rangka to the shareholders regarding issuance of pre- penerbitan HMETD masing-masing sebesar emptive rights were Rp 38,864 and Rp 159,159, Rp 38.864 dan Rp 159.159. respectively. Beban emisi saham yang berasal dari PUT I Share issuance expenses arising from LPO I to kepada para pemegang saham dalam rangka shareholders regarding issuance of pre-emptive penerbitan HMETD adalah sebesar Rp 2.831. rights was Rp 2,831.

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15. PENCADANGAN SALDO LABA DAN 15. APPROPRIATION OF RETAINED EARNINGS DIVIDEN AND DIVIDEND Berdasarkan Undang-undang Perseroan Under Indonesian Limited Company Law, Terbatas, Perusahaan diharuskan untuk companies are required to set up a statutory membuat penyisihan cadangan wajib hingga reserve amounting to at least 20% of the issued sekurang-kurangnya 20% dari jumlah modal yang and paid up capital. ditempatkan dan disetor penuh.

Berdasarkan rapat umum pemegang saham Based on the annual shareholders’ meeting tahunan yang diaktakan dengan Akta Notaris which was notarised by Notarial Deed No. 6 Ny. Poerbaningsih Adi Warsito, S.H. No. 6 dated 4 May 2011 of Ny. Poerbaningsih Adi tanggal 4 Mei 2011, para pemegang saham Warsito, S.H., the Company’s shareholders Perusahaan menyetujui diantaranya: approved, among others: a. pencadangan saldo laba sebesar Rp 6.250; a. appropriation of retained earnings amounting dan to Rp 6,250; and b. pembagian dividen dari penghasilan bersih b. the declaration of dividend from 2010 net tahun 2010 sebesar Rp 134.953 yang profit amounting to Rp 134,953 paid on dibayarkan pada tanggal 30 Juni 2011 dan 30 June 2011 and 15 September 2011; 15 September 2011;

Dividen untuk PT Meadow Indonesia telah The dividend to PT Meadow Indonesia had been dieliminasi untuk tujuan pelaporan keuangan eliminated for the financial reporting purposes pada waktu penggabungan usaha menjadi when the merger became effective. As a result, efektif. Oleh sebab itu, dividen yang dicatat di the dividend recorded in the statements of dalam laporan perubahan ekuitas menjadi changes in equity became Rp 2,496. Rp 2.496.

Perubahan ini telah diterima oleh Kementerian This amendment was received by the Minister of Hukum dan Hak Asasi Manusia Republik Law and Human Rights as stated in the Letter of Indonesia sebagaimana dinyatakan dalam Surat Change in the Company’s Data No. AHU- Penerimaan Pemberitahuan Perubahan Data AH.01.10-24155 dated 28 July 2011 and was Perusahaan No. AHU-AH.01.10-24155 tanggal registered in the Company List No. AHU- 28 Juli 2011 dan telah didaftarkan dalam Daftar 0062043.AH.01.09 Year 2011 dated Perusahaan No. AHU-0062043.AH.01.09 Tahun 28 July 2011. 2011 tanggal 28 Juli 2011. Berdasarkan rapat umum pemegang saham Based on the annual shareholders’ meeting tahunan yang diaktakan dalam Akta Notaris Ny. which was notarised in Notarial Deed No. 99 Poerbaningsih Adi Warsito, S.H. No. 99 tanggal dated 22 June 2012 by Ny. Poerbaningsih Adi 22 Juni 2012 dan yang telah dimuat dalam akta Warsito, S.H., and also in Shareholder’s Penyataan Keputusan Rapat No.55 tanggal Resolution Deed No.55 dated 27 July 2012 by 27 Juli 2012 yang dibuat di hadapan Ny. Poerbaningsih Adi Warsito, S.H., which Ny. Poerbaningsih Adi Warsito, S.H., yang mana amendment was received by the Minister of Law perubahan tersebut telah diterima oleh and Human Rights of the Republic of Indonesia, Kementerian Hukum dan Hak Asasi Manusia as stated also in the Letter of Change in the Republik Indonesia sebagaimana dinyatakan Company’s Articles of Association of PT Matahari dalam Surat Penerimaan Pemberitahuan Department Store Tbk No.AHU-AH.01.10.29626 Perubahan data Perseroan PT Matahari dated 9 August 2012 and was registered in Department Store Tbk No.AHU-AH.01.10.29626 Company List No.AHU-0072998.AH.01.09 Year tanggal 9 Agustus 2012 dan telah didaftarkan 2012 dated 9 August 2012 (see Note 1), the dalam Daftar Perusahaan No.AHU- Company’s shareholders approved, among 0072998.AH.01.09 Tahun 2012 tanggal others, additional appropriation of retained 9 Agustus 2012 (lihat Catatan 1), para pemegang earnings amounting to Rp 4,700. saham Perusahaan menyetujui, diantaranya, penambahan pencadangan saldo laba sebesar Rp 4.700.

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16. PENJUALAN KONSINYASI - BERSIH 16. CONSIGNMENT SALES - NET

2012 2011 2010

Penjualan konsinyasi 7,712,146 6,629,104 4,493,082 Consignment sales Beban penjualan konsinyasi (5,305,270) (4,550,328) (3,092,855) Cost of consignment sales

2,406,876 2,078,776 1,400,227

17. BEBAN POKOK PENDAPATAN 17. COST OF REVENUE

2012 2011 2010 Merchandise for sale Persediaan awal 467,845 406,131 324,984 - beginning Pembelian bersih 1,950,987 1,645,812 1,241,515 Purchases - net Persediaan yang tersedia Merchandise available untuk dijual 2,418,832 2,051,943 1,566,499 for sale Merchandise for sale Persediaan akhir (526,269) (467,845) (406,131) -ending Provisi untuk persediaan 836 485 5,347 Provision for inventory Kerugian atas kebakaran Loss due to fire in gerai (lihat Catatan 32) - (3,846)-store(seeNote32) Beban pokok persediaan 1,893,399 1,580,737 1,165,715 Cost of merchandise Cost of revenue from Beban pokok pendapatan jasa 17,390 14,479 7,708 services fee Beban pokok pendapatan 1,910,789 1,595,216 1,173,423 Cost of revenue

Tidak terdapat transaksi pembelian persediaan There was no purchase from an individual dari pemasok yang secara individu melebihi 10% supplier with transactions more than 10% of total dari jumlah pembelian bersih untuk setiap tahun. net purchases for each year ended.

18. BEBAN PENJUALAN 18. SELLING EXPENSES

2012 2011 2010

Sewa 694,543 629,446 430,746 Rent Pemasaran 142,405 104,125 68,714 Marketing Jasa operasional 118,335 94,726 72,730 Operational services Kartu kredit 38,853 35,606 24,602 Credit card Kantong plastik 25,009 23,380 16,098 Plastic bag Lain-lain 30,448 25,626 14,630 Others 1,049,593 912,909 627,520

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19. BEBAN UMUM DAN ADMINISTRASI 19. GENERAL AND ADMINISTRATION EXPENSES

2012 2011 2010 Gaji dan kesejahteraan karyawan 615,173 505,272 340,421 Salaries and allowance Utilitas dan telekomunikasi 186,338 176,350 121,569 Utility and telecommunication Penyusutan (lihat Catatan 7) 176,089 157,205 108,113 Depreciation (see Note 7) Asuransi 28,961 22,788 17,213 Insurance Perjalanan dinas 18,987 19,757 10,539 Business travel Pemeliharaan dan perbaikan 17,046 14,626 8,138 Repair and maintenance Konsultan 15,875 23,637 2,013 Consultant Pajak dan ijin 15,656 9,694 6,080 Tax and license Amortisasi 4,038 2,352 1,169 Amortisation Perlengkapan 2,233 2,151 2,438 Tools Lain-lain 2,227 3,607 1,851 Others 1,082,623 937,439 619,544

20. KEUNTUNGAN/(KERUGIAN) LAINNYA - 20. OTHER GAINS/(LOSSES) - NET BERSIH 2012 2011 2010 Kerugian atas kebakaran gerai Loss due to fire (lihat Catatan 32) - (9,306) - in store (see Note 32) Keuntungan klaim asuransi 5,397 - - Gain from insurance claim (Kerugian)/keuntungan (Loss)/gain on sale of penjualan aset tetap (236) (1,411) 472 fixed assets Reversal of difference Pembalikan selisih nilai in value from restructuring transaksi restrukturisasi transactions among entities entitas sepengendali - - (210,834) under common control Lain-lain - bersih 5,263 (3,130) 7,066 Others - net 10,424 (13,847) (203,296)

Pembalikan selisih nilai transaksi restrukturisasi The reversal of difference in value from entitas sepengendali merupakan selisih antara transactions among entities under common harga pengalihan dengan nilai buku sehubungan control reflects the difference in value between dengan restrukturisasi entitas sepengendali yang the transfer price and book value among entities dibalik pada saat Perusahaan sudah bukan under common control following restructuring merupakan entitas sepengendali, yaitu pada saat transactions that is reversed when common Perusahaan diakuisisi oleh PT Meadow control ceases, when the Company was acquired Indonesia dan hubungan entitas sepengendali by PT Meadow Indonesia and common control dengan PT Matahari Putra Prima Tbk berhenti with PT Matahari Putra Prima Tbk ceased since sejak 1 April 2010. 1 April 2010.

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21. KEWAJIBAN IMBALAN KERJA 21. EMPLOYEE BENEFITS OBLIGATIONS

Kewajiban pada tanggal laporan dihitung dengan Obligations as at financial statements date are menggunakan metode Projected Unit Credit, calculated using the Projected Unit Credit dengan asumsi kunci sebagai berikut: method, with the following key assumptions: 2012 2011 2010 Tingkat diskonto 5.90% 6.70% 8.71% Discount rate Tingkat kenaikan gaji 10% 10% 10% Salary increment rate Tingkat kematian CSO 1980 CSO 1980 CSO 1980 Mortality rate Tingkat ketidakmampuan/cacat Disability rate (persentase dari CSO 1980) 10% 10% 10%(as a percentage of CSO 1980) 55 tahun/ 55 tahun/ 55 tahun/ Usia pensiun normal years years years Normal retirement age

Kewajiban imbalan kerja pada tanggal Employee benefits obligations as at 31 December 31 Desember 2012, 2011 dan 2010 berdasarkan 2012, 2011 dan 2010 were based on laporan aktuaris independen PT Dayamandiri independent actuary report PT Dayamandiri Dharmakonsolindo masing-masing tanggal Dharmakonsolindo dated 9 January 2013, 9 Januari 2013, 9 Januari 2012 dan 10 Januari 9 January 2012 and 10 January 2011 2011. respectively.

Penyisihan imbalan kerja yang diakui di laporan The employee benefits obligations recognised in posisi keuangan ditentukan sebagai berikut: the statements of financial position were as follows:

2012 2011 2010

Nilai kini dari kewajiban 344,369 264,457 193,075 Present value of obligations Kerugian aktuarial yang belum diakui (128,451) (91,612) (52,121) Unrecognised actuarial loss

215,918 172,845 140,954

Beban yang diakui di laporan laba rugi The amounts recognised in the statements of komprehensif adalah sebagai berikut: comprehensive income were as follows:

2012 2011 2010

Biaya jasa kini 24,669 16,006 11,508 Current service cost Biaya bunga 17,582 16,825 15,285 Interest cost Kerugian Recognition of aktuarial yang diakui 6,542 9,721 4,119 actuarial loss

48,793 42,552 30,912

Mutasi kewajiban imbalan kerja adalah sebagai The movement in employee benefits obligations berikut: was as follows:

2012 2011 2010

Saldo awal 172,845 140,954 114,161 Beginning balance Penambahan selama tahun berjalan 48,793 42,552 30,912 Addition during the year Pembayaran selama tahun berjalan (5,720) (10,661) (4,119) Payment during the year

215,918 172,845 140,954

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21. KEWAJIBAN IMBALAN KERJA (lanjutan) 21. EMPLOYEE BENEFITS OBLIGATIONS (continued) Pengalaman penyesuaian pada liabilitas program The experience adjustments on plan liabilities for untuk tahun yang berakhir 31 Desember 2012 the year ended 31 December 2012 were as adalah sebagai berikut: follows:

2012

Present value of defined Nilai kini kewajiban imbalan pasti 344,369 benefit obligation Defisit program 344,369 Deficit in the plan Penyesuaian pengalaman pada liabilitas program (11,429) Experience adjustments on plan liabilities

22. LABA BERSIH PER SAHAM 22. NET EARNINGS PER SHARE

2012 2011 2010 Laba bersih 770,881 465,648 62,617 Net profit Rata-rata tertimbang Weighted average number jumlah saham of ordinary shares yang beredar outstanding - basic dasar dan dilusian and diluted (dalam jutaan lembar) 2,917 2,917 2,917 (in million shares)

Laba bersih per saham Net earnings per share - dasar dan dilusian - basic and diluted (nilai penuh) 264 160 21 (full amount)

Perusahaan tidak mempunyai efek berpotensi The Company has no potential dilutive ordinary saham biasa yang dilutif. Oleh karena itu, laba shares. Therefore, diluted earning per share is per saham dilusian sama dengan laba per saham equivalent to basic earnings per share. dasar.

23. PINJAMAN DARI PIHAK KETIGA 23. LOAN FROM THIRD PARTY Pada tanggal 31 Desember 2011, total pinjaman As at 31 December 2011, total loan from third dari pihak ketiga sebesar Rp 1.069.746 (2010: party amounting to Rp 1,069,746 (2010: Rp 1.000.000). Pinjaman tersebut berasal dari Rp 1,000,000). The loan was from PT Matahari PT Matahari Pacific sebesar Rp 1.000.000 Pacific amounting to Rp 1,000,000 in connection sehubungan dengan pembelian saham with PT Meadow Indonesia purchase of shares of Perusahaan oleh PT Meadow Indonesia, the Company, based on the agreement dated berdasarkan perjanjian tertanggal 29 Maret 2010 29 March 2010 and bear interest at a rate of 13% dan dikenakan bunga dengan tarif 13% sampai up to 15% per year during five years after 15% per tahun selama lima tahun setelah PT Meadow Indonesia used the loan facility. PT Meadow Indonesia menggunakan fasilitas Interest is presented as addition to loan principal. pinjaman tersebut. Bunga disajikan sebagai After the merger transaction in September 2011, penambah pinjaman. Setelah dilakukannya the loan was transferred to the Company. transaksi penggabungan usaha pada bulan September 2011, pinjaman tersebut dialihkan ke Perusahaan.

Pada tanggal 7 Agustus 2012, Perusahaan On 7 August 2012, the Company fully repaid the membayar seluruh pokok pinjaman dan bunga outstanding loan principal and interest amounting terutang sebesar Rp 1.237.817. to Rp 1,237,817.

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24. BIAYA KARYAWAN 24. EMPLOYEE COSTS

Jumlah biaya karyawan untuk tahun yang Total employee costs for year ended berakhir 31 Desember 2012 adalah sebesar 31 December 2012 amounting to Rp 615,173 Rp 615.173 (2011: Rp 505.272 dan 2010: (2011: Rp 505,272 and 2010: Rp 340,421). Rp 340.421)

Pada tanggal 31 Desember 2012, Perusahaan As at 31 December 2012, the Company had mempunyai karyawan sejumlah 12.702 orang 12,702 employees (2011: 11,574 employees and (2011: 11.574 orang dan 2010: 10.422 orang) - 2010: 10,422 employees) - unaudited. tidak diaudit.

25. TRANSAKSI DENGAN PIHAK BERELASI 25. TRANSACTIONS WITH RELATED PARTY

a. Hubungan dengan pihak berelasi a. The nature of relationships with related party

Hubungan dan sifat transaksi dengan pihak The nature of relationships and transactions berelasi adalah sebagai berikut: with related party are as follows:

Pihak berelasi/ Sifat hubungan/ Sifat transaksi/ Related party Nature of relationship Nature of transactions

Meadow Asia Company Ltd Pemegang saham tidak Pendapatan jasa, penggantian (MACL) langsung/Indirect shareholder beban/Service fee, expense reimbursements

Dewan Direksi dan Komisaris, Manajemen kunci Perusahaan/ Kompensasi dan remunerasi/ Personil manajemen kunci Key management of the Compensation and remuneration lainnya/Board of Directors and Company Commissioners, other key management personnel

b. Transaksi dengan pihak berelasi b. Transactions with related party

Rincian saldo dengan pihak Details balance with related party were as berelasi adalah sebagai berikut: follows:

2012 2011 2010

Piutang lain-lain Other receivables Meadow Asia Meadow Asia Company Ltd 2,413 - - Company Ltd

Persentase dari jumlah aset 0.08 0.00 0.00 Percentage of total assets

Rincian transaksi dengan pihak Details of transactions with related party berelasi adalah sebagai berikut: were as follows:

2012 2011 2010

Pendapatan jasa Service fee Meadow Asia Company Ltd 480 480 132 Meadow Asia Company Ltd

Persentase dari jumlah Percentage of total pendapatan bersih 0.01 0.01 0.00 net revenue

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25. TRANSAKSI DENGAN PIHAK BERELASI 25. TRANSACTIONS WITH RELATED PARTY (lanjutan) (continued)

b. Transaksi dengan pihak berelasi (lanjutan) b. Transactions with related party (continued)

Manajemen kunci termasuk dewan direksi, Key management includes board of komisaris dan personil manajemen kunci directors, commissioners and other key lainnya. Kompensasi yang dibayar atau management personnel. The compensation terutang pada manajemen kunci atas jasa paid or payable to key management for pekerja adalah sebagai berikut: employee services is shown below:

2012 Personil manajemen Dewan Direksi/ Dewan Komisaris/ kunci lainnya/ Board of Board of Other key Directors Commissioner management personnel Gaji dan imbalan Salaries and other karyawan jangka short-term employee pendek lainnya 10,144 3,427 30,884 benefits Imbalan kerja Employee benefits karyawan - - 1,539 obligations 10,144 3,427 32,423

2011 Personil Dewan manajemen Dewan Komisaris/ Direksi/ kunci lainnya/ Board of Board of Other key Commissioner Directors management personnel Gaji dan imbalan Salaries and other karyawan jangka short-term employee pendek lainnya 3,440 2,516 35,519 benefits Imbalan kerja Employee benefits karyawan - - 1,048 obligations 3,440 2,516 36,567

2010 Personil manajemen Dewan Direksi/ Dewan Komisaris/ kunci lainnya/ Board of Board of Other key Directors Commissioner management personnel Gaji dan imbalan Salaries and other karyawan jangka short-term employee 12,840 2,177 29,781 pendek lainnya benefits Imbalan kerja Employee benefits karyawan - - 3,908 obligations 12,840 2,177 33,689

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26. PERJANJIAN-PERJANJIAN PENTING 26. SIGNIFICANT AGREEMENTS

a. Pada bulan November 2009, Perusahaan a. In November 2009, the Company signed an menandatangani ”Perjanjian Penyediaan "Information Technology Services Jasa Teknologi Informasi” dengan Agreement” with PT Matahari Putra Prima PT Matahari Putra Prima Tbk (MPP), di Tbk (MPP), in which the Company agreed to mana Perusahaan telah sepakat untuk accept the services of Retail Technology menerima jasa layanan Sistem Teknologi Systems with Information Technology-Based Ritel yang Berbasis Teknologi Informasi ("Retail Systems") from MPP to support all (“Sistem Ritel”) dari MPP untuk menunjang activities of the Company. seluruh kegiatan usaha Perusahaan.

Perusahaan mengalihkan Perjanjian The Company transferred the Information Penyediaan Jasa Teknologi Informasi dari Technology Services Agreement from MPP MPP ke PT Visionet International (“Visionet”) to PT Visionet International (“Visionet”) on pada tanggal 1 Juli 2010. Perjanjian ini 1 July 2010. This agreement is valid for a berlaku untuk jangka waktu 5 tahun. Tidak period of 5 years. There are no changes ada perubahan mengenai lingkup jasa dan related to scope of service and retail system beban jasa penyediaan sistem ritel service expense compared to the previous dibandingkan dengan perjanjian sebelumnya agreement with MPP. dengan MPP.

Beban jasa penyediaan sistem ritel Retail system service expense was charged dibebankan sebagai bagian dari “Beban as part of the "General and Administration Umum dan Administrasi” sebesar Rp 12.744 expenses", amounting to Rp 12,744 for the untuk tahun yang berakhir 31 Desember year ended 31 December 2012 (2011: 2012 (2011: Rp 11.319 dan 2010: Rp 7.500). Rp 11,319 and 2010: Rp 7,500).

b. Pada tanggal 28 Desember 2010, b. On 28 December 2010, the Company signed Perusahaan menandatangani “Perjanjian an “Agreement of Consultation and Konsultasi dan Jasa Manajemen” dengan Management Services” with MACL, whereby MACL, dimana Perusahaan bertindak theCompanyactsasadvisorandconsultant sebagai penasihat dan konsultan manajemen of management and business of MACL. This dan bisnis MACL. Perjanjian ini mulai efektif agreement is effectively started on 1 October pada tanggal 1 Oktober 2010. Perusahaan 2010. The Company received service fee mendapatkan pendapatan jasa sebesar amounting to Rp 480 per annum. Service fee Rp 480 per tahun. Pendapatan jasa untuk for the year ended 31 December 2012 tahun yang berakhir 31 Desember 2012 amounting to Rp 480 (2011: Rp 480 and sejumlah Rp 480 (2011: Rp 480 dan 2010: 2010: Rp 132). Rp 132).

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26. PERJANJIAN-PERJANJIAN PENTING 26. SIGNIFICANT AGREEMENTS (continued) (lanjutan)

c. Perusahaan telah menandatangani 8 c. The Company has signed 8 Memorandum of Memorandum of Understanding (MoU) untuk Understanding (MoU) for opening new pembukaan gerai-gerai baru. Gerai baru stores. The stores are located in several tersebut berada di beberapa lokasi di locations in Indonesia and expected to start Indonesia dan diperkirakan akan beroperasi commercial operations at the end of 2013. pada akhir tahun 2013. Total estimasi The estimated total lease commitment for komitmen sewa dari gerai-gerai tersebut those new stores is Rp 365,686 for a lease adalah Rp 365.686 untuk masa sewa 10-11 period of 10-11 years. tahun.

d. Pada bulan Juni 2012, Perusahaan telah d. In June 2012, the Company has signed 10 menandatangani 10 perjanjian sewa dengan lease agreements with PT Matahari Putra PT Matahari Putra Prima Tbk. Jumlah Prima Tbk. Total lease commitment for such komitmen sewa untuk gerai-gerai tersebut stores are Rp 232,400 for lease period of 1- adalah Rp 232.400 untuk masa sewa 1-22 22 years which has been fully paid by the tahun yang telah dibayar penuh oleh Company in June 2012. Perusahaan pada bulan Juni 2012.

27. PELAPORAN SEGMEN 27. SEGMENT REPORTING

Pembuat keputusan operasional menggunakan The chief operating decision-maker uses store indikator kinerja gerai sebagai alat untuk performance indicators as tools in analysing its menganalisa bisnisnya. Kinerja gerai business. The store performance is grouped into dikelompokkan berdasarkan area geografis. Oleh geographical areas. Therefore, the Company karena itu, Perusahaan melaporkan segmennya reports its segment by geographical area. berdasarkan area geografis.

Ikhtisar gerai berdasarkan area geografis adalah A summary of stores by geographical area is as sebagai berikut – tidak diaudit: follows – unaudited:

2012 2011 2010

Sumatera 18 17 16 Sumatera Jawa 75 68 61 Java Kalimantan, Sulawesi dan Kalimantan, Sulawesi and Maluku 19 15 15 Maluku Lainnya 4 3 3 Others

116 103 95

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27. PELAPORAN SEGMEN (lanjutan) 27. SEGMENT REPORTING (continued)

Ikhtisar segmen berdasarkan area geografis A summary segments by geographical area is as adalah sebagai berikut: follows:

2012 Kalimantan, Jawa/ Sulawesi Lainnya/ Jumlah segmen/ Sumatera Java and Maluku Others Total segment

Pendapatan/Revenue 887,197 3,475,590 963,060 255,853 5,581,700 Pendapatan jasa/Services fee 35,232 5,616,932

Hasil segmen/Segment result 355,420 1,212,234 377,839 93,359 2,038,852 Beban usaha yang tidak dapat dialokasikan/ Unallocated operating expenses (454,501) Laba operasi/Operating profit 1,584,351

Aset segmen/Segment assets 165,160 749,216 209,772 59,904 1,184,052 Aset yang tidak dapat dialokasikan/ Unallocated assets 1,745,700 Jumlah aset/Total assets 2,929,752

Aset tetap setelah dikurangi akumulasi penyusutan/Fixed assets net of accumulated depreciation 83,566 410,857 115,263 30,922 640,608 Aset tetap yang tidak dapat dialokasikan setelah dikurangi akumulasi penyusutan/ Unallocated fixed assets net of accumulated depreciation 53,397 Jumlah aset tetap setelah dikurangi akumulasi penyusutan/Total fixed assets net of accumulated depreciation 694,005 Penambahan aset tetap/Additions of fixed assets 25,681 133,555 56,924 17,354 233,514 Penambahan aset tetap yang tidak dapat dialokasikan/Unallocated additions of fixed assets 14,983 Jumlah penambahan aset tetap/Total additions of fixed assets 248,497

Beban penyusutan/Depreciation expenses 21,847 107,488 27,180 5,488 162,003 Beban penyusutan yang tidak dapat dialokasikan/Unallocated depreciation expenses 14,086 Jumlah beban penyusutan/Total depreciation expenses 176,089

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27. PELAPORAN SEGMEN (lanjutan) 27. SEGMENT REPORTING (continued)

2011 Kalimantan, Jawa/ Sulawesi Lainnya/ Jumlah segmen/ Sumatera Java and Maluku Others Total segment

Pendapatan/Revenue 761,723 2,919,166 772,973 220,346 4,674,208 Pendapatan jasa/Services fee 26,504 4,700,712 Hasil segmen/Segment result 299,122 994,092 303,546 85,073 1,681,833 Beban usaha yang tidak dapat dialokasikan/ Unallocated operating expenses (440,532) Laba operasi/Operating profit 1,241,301

Aset segmen/Segment assets 158,200 690,536 162,541 39,283 1,050,560 Aset yang tidak dapat dialokasikan/ Unallocated assets 1,371,912 Jumlah aset/Total assets 2,422,472

Aset tetap setelah dikurangi akumulasi penyusutan/Fixed assets net of accumulated depreciation 79,431 385,438 85,728 19,094 569,691 Aset tetap yang tidak dapat dialokasikan setelah dikurangi akumulasi penyusutan/ Unallocated fixed assets net of accumulated depreciation 53,200 Jumlah aset tetap setelah dikurangi akumulasi penyusutan/Total fixed assets net of accumulated depreciation 622,891 Penambahan aset tetap/Additions of fixed assets 30,045 115,740 27,134 5,466 178,385 Penambahan aset tetap yang tidak dapat dialokasikan/Unallocated additions of fixed assets 36,993 Jumlah penambahan aset tetap/Total additions of fixed assets 215,378

Beban penyusutan/Depreciation expenses 17,795 99,461 22,272 4,343 143,871 Beban penyusutan yang tidak dapat dialokasikan/Unallocated depreciation expenses 13,334 Jumlah beban penyusutan/Total depreciation expenses 157,205

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27. PELAPORAN SEGMEN (lanjutan) 27. SEGMENT REPORTING (continued)

2010 Kalimantan, Jawa/ Sulawesi Lainnya/ Jumlah segmen/ Sumatera Java and Maluku Others Total segment Pendapatan/Revenue 508,897 2,069,489 563,288 160,326 3,302,000 Pendapatan jasa/Services fee 14,699 3,316,699 Hasil segmen/Segment result 196,517 693,117 211,258 61,621 1,162,513 Beban usaha yang tidak dapat dialokasikan/ Unallocated operating expenses (469,597) Laba operasi/Operating profit 692,916

Aset segmen/Segment assets 138,488 625,208 159,936 36,793 960,425 Aset yang tidak dapat dialokasikan/ Unallocated assets 1,284,759 Jumlah aset/Total assets 2,245,184

Aset tetap setelah dikurangi akumulasi penyusutan/Fixed assets net of accumulated depreciation 67,416 369,554 88,546 17,971 543,487 Aset tetap yang tidak dapat dialokasikan setelah dikurangi akumulasi penyusutan/ Unallocated fixed assets net of accumulated depreciation 28,612 Jumlah aset tetap setelah dikurangi akumulasi penyusutan/Total fixed assets net of accumulated depreciation 572,099 Penambahan aset tetap/Additions of fixed assets 36,817 91,696 25,003 2,253 155,769 Penambahan aset tetap yang tidak dapat dialokasikan/Unallocated additions of fixed assets 4,920 Jumlah penambahan aset tetap/Total additions of fixed assets 160,689

Beban penyusutan/Depreciation expenses 10,513 69,238 17,187 3,328 100,266 Beban penyusutan yang tidak dapat dialokasikan/Unallocated depreciation expenses 7,847 Jumlah beban penyusutan/Total depreciation expenses 108,113

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28. ASET DAN LIABILITAS MONETER DALAM 28. MONETARY ASSETS AND LIABILITIES IN MATA UANG ASING FOREIGN CURRENCIES

Pada tanggal 31 Desember 2012, Perusahaan As at 31 December 2012, the Company only had hanya memiliki aset moneter dalam mata uang monetary assets denominated in foreign asing berupa kas dan setara kas sejumlah currencies in the form of cash and cash USD 201.058 (nilai penuh) (2011: USD 93.026 equivalents amounting to USD 201,058 (full (nilai penuh) dan 2010: USD 76.098 (nilai amount) (2011: USD 93,026 (full amount) and penuh)) yang dijabarkan dalam Rupiah senilai 2010: USD 76,098 (full amount)) translated into Rp 1.944 (2011: Rp 844 dan 2010: Rp 684). Rupiah amounting to Rp 1,944 (2011: Rp 844 and 2010: Rp 684).

29. INFORMASI TAMBAHAN UNTUK ARUS KAS 29. SUPPLEMENTARY INFORMATION FOR CASH FLOWS 2012 2011 2010 Aktivitas signifikan yang tidak Significant activities not mempengaruhi arus kas affecting cash flows - Penambahan aset tetap Acquisition of fixed assets - melalui akrual through accruals (lihat Catatan 10) (29,554) (23,825) (16,446) (See Note 10)

30. MANAJEMEN RISIKO KEUANGAN 30. FINANCIAL RISK MANAGEMENT

(i) Faktor risiko keuangan (i) Financial risk factors

Berbagai aktivitas yang dilakukan membuat The Company’s activities are exposed to a Perusahaan terekspos terhadap berbagai macam variety of financial risks: market risk (including risiko keuangan: risiko pasar (termasuk risiko interest rate risk and price risk), credit risk and tingkat bunga dan risiko harga), risiko kredit serta liquidity risk. The Company has no significant risiko likuiditas. Perusahaan tidak mempunyai foreign exchange risk as the Company’s risiko yang signifikan terhadap nilai tukar mata transactions are mostly in Rupiah. The uang asing karena sebagian besar transaksi Company’s treasury policies are designed to Perusahaan adalah dalam Rupiah. Kebijakan mitigate the financial impact of fluctuations in keuangan Perusahaan dimaksudkan untuk interest rates and foreign exchange rates and to mengurangi dampak keuangan dari fluktuasi minimise potential adverse effects on the tingkat bunga dan nilai tukar mata uang asing Company’s financial risk. serta meminimalisasi potensi kerugian yang dapat berdampak pada risiko keuangan Perusahaan.

(a) Risiko pasar (a) Market risk

Risiko tingkat bunga Interest rate risk

Perusahaan terekspos risiko tingkat suku The Company is exposed to interest rate risk bunga yang timbul dari pinjaman bank arising from floating rates of bank loans. dengan suku bunga mengambang.

Kenaikan tingkat suku bunga akan An increase in interest rates would increase menaikkan beban pinjaman dan berdampak borrowing costs and adversely affect the buruk terhadap keuntungan Perusahaan. profitability of the Company. Any significant Kenaikan tingkat suku bunga yang signifikan, increase in interest rates, especially for a khususnya untuk periode yang panjang, prolonged period, could have a material and dapat berdampak besar dan buruk terhadap adverse effect on the business, financial bisnis, posisi keuangan, hasil operasi dan position, result of operations and prospects prospek Perusahaan. of the Company.

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30. MANAJEMEN RISIKO KEUANGAN (lanjutan) 30. FINANCIAL RISK MANAGEMENT (continued)

(i) Faktor risiko keuangan (lanjutan) (i) Financial risk factors (continued)

(a) Risiko pasar (lanjutan) (a) Market risk (continued)

Risiko tingkat bunga (lanjutan) Interest rate risk (continued)

Risiko ini dikelola pada umumnya dengan This exposure is managed mainly through menggunakan fasilitas swap suku bunga the use of interest rate swaps, which have untuk mengkonversi bagian tertentu dari the economic effect of converting certain pinjaman dengan tingkat bunga portion of the loans from floating rate to fixed mengambang menjadi tingkat bunga tetap rate (see Note 12). Interest rate exposure is (lihat Catatan 12). Perusahaan memonitor monitored to minimise any negative impact to pergerakan tingkat suku bunga untuk the Company. meminimalisir dampak negatif yang mungkin timbul. The Company’s borrowings profile after Profil pinjaman Perusahaan setelah taking into account hedging transactions is memperhitungkan transaksi lindung nilai as follows: adalah sebagai berikut:

2012 2011 2010

Pinjaman dengan tingkat Fixed interest rates suku bunga tetap 1,235,000 1,472,250 1,584,375 borrowings Pinjaman dengan tingkat Floating interest rates suku bunga mengambang 1,834,253 988,934 1,503,125 borrowings

3,069,253 2,461,184 3,087,500

Pada tanggal 31 Desember 2012, jika tingkat As at 31 December 2012, if interest rates on bunga atas pinjaman yang didenominasikan Rupiah-denominated borrowings had been dalam Rupiah lebih tinggi/rendah 1% dan 1% higher/lower with all other variables held variabel lain dianggap tetap, laba setelah constant, post-tax profit for the year would pajak untuk tahun berjalan akan lebih have been Rp 13,757 lower/higher, mainly as rendah/tinggi sebesar Rp 13.757, terutama a result of higher/lower interest expense on sebagai akibat tingginya/rendahnya beban floating rate borrowings. bunga dari pinjaman dengan suku bunga mengambang.

Risiko harga Price risk

Perusahaan tidak mempunyai risiko harga The Company has no significant price risks. yang signifikan.

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30. MANAJEMEN RISIKO KEUANGAN (lanjutan) 30. FINANCIAL RISK MANAGEMENT (continued)

(i) Faktor risiko keuangan (lanjutan) (i) Financial risk factors (continued)

(b) Risiko kredit (b) Credit risk

Perusahaan memiliki risiko kredit yang The Company is exposed to credit risk terutama berasal dari simpanan di bank. primarily from deposits with banks.

Perusahaan mengelola risiko kredit yang The Company manages credit risk exposed terkait dengan simpanan di bank dengan from its deposits with banks by only using hanya menggunakan bank-bank dengan banks with good ratings. predikat yang baik.

Tidak terdapat risiko kredit yang signifikan There is no significant credit risk from trade atas piutang usaha, karena hanya receivables, as they only represent credit merupakan piutang kartu kredit dari bank card receivables from banks that are usually yang biasanya akan dilunasi dalam periode 2 settled within 2 or 3 days of the transaction sampai dengan 3 hari kerja dari tanggal date. transaksi.

Perusahaan mengelola risiko likuiditas The Company manages its liquidity risk by dengan pengawasan proyeksi dan arus kas continuously monitoring rolling forecasts of aktual secara terus menerus serta the Company's liquidity requirements and pengawasan tanggal jatuh tempo aset dan actual cash flow and the due date of financial liabilitas keuangan. assets and liabilities.

Perusahaan juga membuat proyeksi arus kas The Company also prepares regular cash rutin untuk memantau pembayaran pokok flow projections to monitor the payment of pinjaman dan bunga pinjaman. maturity loan principals and interest.

Tabel di bawah ini menganalisis liabilitas The table below analyses the Company’s keuangan Perusahaan. Jumlah yang financial liabilities. The amounts disclosed in diungkapkan dalam tabel merupakan arus the table are the contractual undiscounted kas kontraktual yang tidak didiskontokan. cash flows.

Antara 3 Antara 1 Antara 2 Kurang bulan dan dan 2 dan dari 1 tahun/ tahun/ 5 tahun/ 3 bulan/ Between Between Between Less than 3 months 1 and 2 2 and 5 Jumlah/ 3months and 1 year years years Total

Pinjaman 5,872 478,063 744,562 1,730,599 2,959,096 Borrowings

Selain pinjaman, liabilitas keuangan Except for borrowings, the Company’s Perusahaan memiliki jatuh tempo kurang dari financial liabilities due less than 3 months. 3 bulan.

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30. MANAJEMEN RISIKO KEUANGAN (lanjutan) 30. FINANCIAL RISK MANAGEMENT (continued)

(ii) Manajemen permodalan (ii) Capital management

Tujuan Perusahaan dalam pengelolaan The Company's objectives when managing permodalan adalah untuk mempertahankan capital are to safeguard the Company's ability to kelangsungan usaha Perusahaan guna continue as a going concern in order to provide memberikan imbal hasil kepada pemegang returns for shareholders and benefits for other saham dan manfaat kepada pemangku stakeholders and to maintain an optimal capital kepentingan lainnya serta menjaga struktur structure to reduce the cost of capital. modal yang optimal untuk mengurangi biaya modal.

Untuk mempertahankan atau menyesuaikan In order to maintain or adjust the capital struktur modal, Perusahaan menyesuaikan structure, the Company may adjust the amount jumlah dividen yang dibayar kepada pemegang of dividends paid to shareholders. saham.

Jumlah modal yang dikelola Perusahaan dihitung Total capital which is managed by the Company dengan mengeluarkan saldo selisih nilai is calculated by excluding the balance of transaksi restrukturisasi entitas sepengendali dari difference in value from restructuring ekuitas. Sehingga, modal yang dikelola transactions among entities under common Perusahaan pada tanggal 31 Desember 2012 control from equity. As the result, the capital adalah Rp 1.835.594 (2011: Rp 1.064.713 dan which is managed by the Company as of 2010: Rp 601.561). 31 December 2012 was Rp 1,835,594 (2011: Rp 1,064,713 and 2010: Rp 601,561).

(iii) Nilai wajar instrumen keuangan (iii) Fair values of financial instruments

Nilai wajar aset dan liabillitas keuangan The fair value of financial assets and liabilities is diestimasi untuk keperluan pengakuan dan estimated for recognition and measurement or for pengukuran atau untuk keperluan disclosure purposes. pengungkapan.

Nilai tercatat aset keuangan seperti kas dan The carrying amount of financial assets such as setara kas, piutang usaha, piutang lain-lain, aset cash and cash equivalents, trade receivables, lancar lainnya, aset tidak lancar lainnya serta other receivables, other current assets, other liabilitas keuangan seperti pinjaman bank, utang non-current assets and financial liabilities such as usaha, utang lain-lain dan akrual mendekati nilai bank loans, trade payables, other payables and wajarnya. accruals approximate their fair value.

Pada tanggal 31 Desember 2012, nilai tercatat On 31 December 2012, the carrying value of uang jaminan sebesar Rp 89.331 (2011: refundable deposits amounts to Rp 89,331 (2011: Rp 74.490 dan 2010: Rp 66.660) sedangkan nilai Rp 74,490 and 2010: Rp 66,660) while their fair wajarnya adalah sebesar Rp 67.236 (2011: value amounts to Rp 67,236 (2011: Rp 55,808 Rp 55.808 dan 2010: Rp 47.332). and 2010: Rp 47,332).

Nilai wajar dari uang jaminan untuk keperluan The fair value of refundable deposits for penyajian diestimasi dengan mendiskontokan disclosure purposes is estimated by discounting arus kas kontrak masa depan pada tingkat bunga the future contractual cash flows at the current pasar saat ini yang berkisar antara 4%-5% per market interest rate which is between 4%-5% per tahun. annum.

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31. KOMITMEN BARANG MODAL DAN 31. CAPITAL COMMITMENTS AND CONTINGENT LIABILITAS KONTINJENSI LIABILITIES

Pada tanggal 31 Desember 2012, Perusahaan As at 31 December 2012, the Company had mempunyai komitmen untuk pembelian aset commitments to purchase fixed assets amounting tetap sebesar Rp 64.033 (2011 dan 2010: tidak to Rp 64,033 (2011 and 2010: there are no ada komitmen barang modal yang signifikan). significant capital commitments. There are no Tidak ada liabilitas kontijensi yang signifikan significant contingent liabilities as at pada tanggal 31 Desember 2012, 2011 dan 31 December 2012, 2011 and 2010. 2010.

32. KERUGIAN ATAS KEBAKARAN GERAI 32.LOSSDUETOFIREINSTORE

Pada tanggal 27 Juni 2011, gerai Perusahaan On 27 June 2011, the Company’s store located in yang berlokasi di Makassar mengalami Makassar had a fire incident. Net loss from kebakaran. Nilai kerugian bersih atas persediaan inventories and net book value of fixed assets dan nilai buku aset tetap yang terbakar adalah burnt are Rp 3,846 and Rp 5,460, respectively. masing-masing sebesar Rp 3.846 dan Rp 5.460.

Pada tahun 2012, klaim kerugian yang sudah In 2012, the net loss claim that has been received didapatkan sebesar Rp 5.397. Manajemen amounting Rp 5,397. Management believes that berkeyakinan bahwa sisa kerugian atas the remaining loss from fire will be borne entirely kebakaran akan ditanggung seluruhnya oleh by the insurance company as the sum insured is perusahaan asuransi karena nilai pertanggungan greater than that lost. asuransi masih lebih besar dari nilai kerugian tersebut.

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